Knowledge that Transforms

Using cross-state variation in minimum wages, we observe a positive relationship between the minimum wage and the number of alcohol-related accidents involving teen drivers. A similar effect is not observed when examining accidents among adults. The results are consistent with a positive income elasticity for alcoholic beverages and driving activities among young people, in particular for consumption out of discretionary income accorded by higher minimum wages. Evidence of a sizable impact of beer taxes on alcohol-related accidents among youths suggests that beer taxes are one avenue for policymakers to consider in counteracting this unintended consequence of minimum wages.

Using a method-of-moments estimator, flexible three-parameter beta distributions are fitted to aggregate country-level income data to overcome an untenable assumption of previous studies that persons within each income group receive the same income. Regional and global income distributions are derived as weighted mixtures of country-specific distributions. Analytical expressions for Gini and Theil's measures of inequality at country, regional, and global levels are derived in terms of the parameters of the beta distributions. Application to data for 91 countries in 1993 and 2000 reveals a high degree of global inequality, with evidence of declining inequality, largely attributable to growth in China.

In 2007, the Consumer Product Safety Commission issued 212 recalls of toys and other children's products, a sizable increase from previous years. We investigate changes in toy sales following these recalls. We find that for manufacturers that had recalls, unit sales of the types of toys involved in the recall fell relative to their sales of toys in other categories. We do not find evidence of within-manufacturer spillovers to dissimilar toys. We do, however, find large industry-wide spillovers in the form of sales losses to manufacturers that did not experience any recalls. Our results shed light on how consumers may draw inferences from information about product safety.

This paper investigates whether patent applicants strategically withhold citations to material prior art. Citation data suggest that applicants withhold between 21% and 33% of relevant citations. Variation in withholdings is explained by patent portfolio size and indicators of patent value. These data also highlight important differences across technology classes. In particular, firms are significantly less likely to withhold a citation when applying for chemical and drug patents. Robustness checks confirm that these results are not explained by inventor and attorney familiarity with citations, patent examiner heterogeneity, or the nationality of the inventor.

We model the interrelations of equity market volatility in eight East Asian countries before, during, and after the Asian currency crisis. Using a new class of asymmetric volatility multiplicative error models based on the daily range, we find that dynamic propagation of volatility shocks occurs through a network of interdependencies, and shocks originating in Hong Kong may be amplified in their transmission throughout the system, posing greater risks to the region than shocks originating elsewhere. Although this partly explains the severity of the currency crisis, we also find evidence that parameters shifted, making the system more unstable during the crisis.

This paper analyzes how electoral incentives affected the performance of a major decentralized conditional cash transfer program intended on reducing school dropout rates among children of poor households in Brazil. We show that while this federal program successfully reduced school dropout by 8 percentage points, the program's impact was 36% larger in municipalities governed by mayors who faced reelection possibilities compared to those with lame-duck mayors. First-term mayors with good program performance were much more likely to be reelected. These mayors adopted program implementation practices that were not only more transparent but also associated with better program outcomes.

Using controlled experiments, we examine how individuals make choices when faced with multiple options. Choice tasks are designed to mimic the selection of health insurance, prescription drug, or retirement savings plans. In our experiment, available options can be objectively ranked allowing us to examine optimal decision making. First, the probability of a person selecting the optimal option declines as the number of options increases, with the decline being more pronounced for older subjects. Second, heuristics differ by age with older subjects relying more on suboptimal decision rules. In a heuristics validation experiment, older subjects make worse decisions than younger subjects.

This paper develops a framework for inferring common Markov-switching components in panel data sets with large cross-section and time series dimensions. We study similarities and differences across U.S. states in the timing of business cycles. We hypothesize that there exists a small number of cluster designations, with individual states in a given cluster sharing certain business cycle characteristics. We find that although oil-producing and agricultural states can sometimes experience a separate recession from the rest of the United States, for the most part, differences across states appear to be a matter of timing, with some states entering recession or recovering before others.

We semiparametrically estimate average causal effects of different lengths of exposure to academic and vocational instruction in the Job Corps (JC) under the assumption that selection into different lengths is based on a rich set of observed covariates and time-invariant factors. We find that the estimated effects on future earnings increase in the length of exposure and that the marginal effects of additional instruction decrease with length of exposure. We also document differences in the estimated effects across demographic groups, which are particularly large between males and females. Finally, our results suggest an important lock-in effect in JC training. No rights reserved. This work was authored as part of the Contributor's official duties as an Employee of the United States Government and is therefore a work of the United States Government. In accordance with 17 U.S.C. 105, no copyright protection is available for such works under U.S. law..

This paper considers how oral contraception's diffusion to young unmarried women affected the number and parental characteristics of children born to these women. In the short-term, pill access caused declines in fertility and increases in both the share of children born with low birthweight and the share born to poor households. In the long-term, access led to negligible changes in fertility while increasing the share of children with college-educated mothers and decreasing the share with divorced mothers. The short-term effects appear to be driven by upwardly-mobile women opting out of early childbearing while the long-term effects appear to be driven by a retiming of births to later ages. These effects differ from those of abortion legalization, although we find suggestive evidence that pill diffusion lowered abortions. Our results suggest that abortion and the pill are on average used for different purposes by different women, but on the margin some women substitute from abortion towards the pill when both are available. JELNo. I0, J13, N12.