Knowledge that Transforms

We employ a discrete choice experiment in the employment process for a national call center to estimate the willingness to pay distribution for alternative work arrangements relative to traditional office positions. Most workers are not willing to pay for scheduling flexibility, though a tail of workers with high valuations allows for sizable compensating differentials. The average worker is willing to give up 20 percent of wages to avoid a schedule set by an employer on short notice, and 8 percent for the option to work from home. We also document that many job-seekers are inattentive, and we account for this in estimation.

I model the equilibrium risk sharing between countries with varying financial development. The most financially developed country takes greater risks because its financial intermediaries deal with funding problems better. In good times, the more financially developed country consumes more and runs a trade deficit financed by the higher financial income that it earns as compensation for taking greater risk. During global crises, it suffers heavier losses. Its currency emerges as the reserve currency because it appreciates during crises, thus providing a good hedge. I provide evidence that financial net worth plays a crucial role in understanding this asymmetric risk sharing.

We examine the impact of policy uncertainty on trade, prices, and real income through firm entry investments in general equilibrium. We estimate and quantify the impact of trade policy on China's export boom to the United States following its 2001 WTO accession. We find the accession reduced the US threat of a trade war, which can account for over one-third of that export growth in the period 2000– 2005. Reduced policy uncertainty lowered US prices and increased its consumers' income by the equivalent of a 13-percentage-point permanent tariff decrease. These findings provide evidence of large effects of policy uncertainty on economic activity and the importance of agreements for reducing it.

We consider a class of dynamic collective action problems in which either a single principal or two competing principals vie for the support of members of a group. We focus on the dynamic problem that emerges when agents negotiate and commit their support to principals sequentially. We show that competition reduces agents' welfare with public goods, or if and only if there are positive externalities on uncommitted agents, and increases agents' welfare with public bads. We apply the model to the study of corporate takeovers, vote buying, and exclusive deals.

The 1870–1913 period marked the birth of the first era of trade globalization. How did this tremendous increase in trade affect economic development? This work isolates a causality channel by exploiting the fact that the introduction of the steamship in the shipping industry produced an asymmetric change in trade distances among countries. Before this invention, trade routes depended on wind patterns. The steamship reduced shipping costs and time in a disproportionate manner across countries and trade routes. Using this source of variation and novel data on shipping, trade, and development, I find that (i) the adoption of the steamship had a major impact on patterns of trade worldwide; (ii) only a small number of countries, characterized by more inclusive institutions, benefited from trade integration; and (iii) globalization was the major driver of the economic divergence between the rich and the poor portions of the world in the years 1850–1900.

In a recent article in the American Economic Review, Dahl and Lochner (2012) use changes in the Earned Income Tax Credit to estimate the causal effect of family income on child achievement. Their instrumental variable (IV ) estimates imply that a $1,000 increase in income raises combined math and reading test scores by about 6 percent of a standard deviation. I document a variable coding error. Correcting this error reduces the IV estimates by 32 percent; correcting this error does not change the qualitative conclusions of the study.

We propose a novel and easy-to-implement approach to detect potential overbilling based on the hours worked implied by the service codes which physicians submit to Medicare. Using the Medicare Part B Fee- for-Service (FFS) Physician Utilization and Payment Data in 2012 and 2013 released by the Centers for Medicare and Medicaid Services, we construct estimates for physicians' hours spent on Medicare beneficiaries. We find that about 2,300 physicians, representing about 3 percent of those with 20 or more hours of Medicare Part B FFS services, have billed Medicare over 100 hours per week. We consider these implausibly long hours.

Coordinated single-offer school assignment systems are a popular education reform. We show that uncoordinated offers in NYC's school assignment mechanism generated mismatches. One-third of applicants were unassigned after the main round and later administratively placed at less desirable schools. We evaluate the effects of the new coordinated mechanism based on deferred acceptance using estimated student preferences. The new mechanism achieves 80 percent of the possible gains from a no-choice neighborhood extreme to a utilitarian benchmark. Coordinating offers dominates the effects of further algorithm modifications. Students most likely to be previously administratively assigned experienced the largest gains in welfare and subsequent achievement.

We study the evolution of trade liberalization's effects on Brazilian local labor markets. Regions facing larger tariff cuts experienced prolonged declines in formal sector employment and earnings relative to other regions. The impact of tariff changes on regional earnings 20 years after liberalization was three times the effect after 10 years. These increasing effects on regional earnings are inconsistent with conventional spatial equilibrium models, which predict declining effects due to spatial arbitrage. We investigate potential mechanisms, finding empirical support for a mechanism involving imperfect interregional labor mobility and dynamics in labor demand, driven by slow capital adjustment and agglomeration economies. This mechanism gradually amplifies the effects of liberalization, explaining the slow adjustment path of regional earnings and quantitatively accounting for the magnitude of the long-run effects.

Rothstein (2017) successfully replicates Chetty, Friedman, and Rockoff's (2014a, b)—henceforth, CFR's—results using data from North Carolina, but raises concerns about CFR's methods. We show that Rothstein's methodological critiques are invalid by presenting simulations and supplementary empirical evidence which show that (i) his preferred imputation of missing data generates bias; (ii) his “placebo test” rejects valid research designs; and (iii) his method of controlling for covariates yields inconsistent estimates of teachers' long-term effects. Consistent with the conclusions of Bacher-Hicks, Kane, and Staiger (2016) using data from Los Angeles, we conclude that Rothstein's replication study ultimately reinforces CFR's methods and results.