Knowledge that Transforms

This paper compares outcomes from informally negotiated oil and gas leases to those awarded via centralized auction. We focus on Texas, where legislative decisions in the early twentieth century assigned thousands of proximate parcels to different mineral allocation mechanisms. We show that during the fracking boom, which began unexpectedly decades later, auctioned leases generated at least 55 percent larger up-front payments and 40 percent more output than negotiated leases did. These results suggest large potential gains from employing centralized, formal mechanisms in markets that traditionally allocate in an unstructured fashion, including the broader $3 trillion market for privately owned minerals.

We provide theory and evidence on the relationship between globalization and pandemics. Business travel facilitates trade and travel leads to human interactions that transmit disease. Trade-motivated travel generates an epidemiological externality across countries. If infections lead to deaths, or reduce individual labor supply, we establish a general equilibrium social distancing effect, whereby increases in relative prices in unhealthy countries reduce travel to those countries. If agents internalize the threat of infection, we show that their behavioral responses lead to a reduction in travel that is larger for higher-trade-cost locations, which initially reduces the ratio of trade to output.

We study health-care provider agency and optimal payments, considering an expensive medication for dialysis patients. Using Medicare claims data we estimate a structural model of treatment decisions, in which providers differ in their altruism and marginal costs, and this heterogeneity is unobservable to the government. In a novel application of nonlinear pricing methods, we empirically characterize the optimal contracts in this environment. The optimal contracts eliminate medically excessive dosages and reduce expenditures, resulting in approximately $300 million in annual gains from better contracting. This approach could be applied to a broad class of problems in health-care payment policy.

We develop a deep learning model to detect emotions embedded in press conferences after the Federal Open Market Committee meetings and examine the influence of the detected emotions on financial markets. We find that, after controlling for the Federal Reserve’s actions and the sentiment in policy texts, a positive tone in the voices of Federal Reserve chairs leads to significant increases in share prices. Other financial variables also respond to vocal cues from the chairs. Hence, how policy messages are communicated can move the financial market. Our results provide implications for improving the effectiveness of central bank communications.

We study differences in exposure to factor-biased technical change among occupations by providing the first measures of capital-embodied technical change (CETC) and of the elasticity of substitution between capital and labor at the occupational level. We document sizable occupational heterogeneity in both measures, but quantitatively, it is the heterogeneity in factor substitutability that fuels workers’ exposure to CETC. In a general equilibrium model of worker sorting across occupations, CETC accounts for almost all of the observed labor reallocation in the US between 1984 and 2015. Absent occupational heterogeneity in factor substitutability, CETC accounts for only 17 percent of it

I give conditions under which changes in private spending are accommodated in general equilibrium exactly like changes in aggregate fiscal expenditure. Under such demand equivalence, researchers can use time series evidence on fiscal multipliers to recover the general equilibrium “missing intercept” of shocks to private spending identified in the cross section. Through the lens of this theory, time series estimates of a fiscal multiplier around one suggest a missing intercept close to zero—an observation that I illustrate with an application to the 2008 tax rebates. I also discuss the robustness of this aggregation approach to plausible violations of demand equivalence.

This study investigates the role of retail pharmacy ownership in the opioid epidemic. Using data of prescription opioid orders, we show that compared with chain pharmacies, independent pharmacies dispense 39.1 percent more opioids and 60.5 percent more OxyContin. After an independent pharmacy becomes a chain pharmacy, opioid dispensing decreases. Using the OxyContin reformulation, which reduced nonmedical demand but not the legitimate medical demand, we show that at least one-third of the difference in the amount of OxyContin dispensed can be attributed to nonmedical demand. We show that differences in competitive pressure and whether pharmacists own the pharmacy drive our estimates.

HIV/AIDS has been one of the largest public health crises in recent history, and the US federal government has spent hundreds of billions of dollars fighting the disease. This study examines the impact of the large amounts of federal funding allocated to US cities to combat HIV/AIDS through the Ryan White CARE Act’s first title. The findings indicate that the cost to avoid an HIV/AIDS death through the program is roughly $334,000, that the program has saved approximately 57,000 lives through 2018, and that funding disparities are responsible for the uneven progress in combating HIV/AIDS across the United States.

Moral behavior is more prevalent when individuals cannot easily distort their beliefs self-servingly. Do individuals seek to limit or enable their ability to distort beliefs? How do these choices affect behavior? Experiments with over 9,000 participants show preferences are heterogeneous—30 percent of participants prefer to limit belief distortion, while over 40 percent prefer to enable it, even if costly. A random assignment mechanism reveals that being assigned to the preferred environment is necessary for curbing or enabling self-serving behavior. Third parties can anticipate these effects, suggesting some sophistication about the cognitive constraints to belief distortion.

I study the persuasive effects of slanted language, exploiting a ban on the politically charged term “illegal immigrant” by the Associated Press (AP) news wire. My empirical strategy combines the timing of the ban with variation across media outlets in their baseline reliance on AP copy. I document sizable diffusion of the ban from AP copy to media outlets. Moreover, individuals exposed to the ban through local media show significantly lower support for restrictive immigration policies. This effect is more pronounced for moderates and in locations with fewer immigrants, and does not transfer to views on issues other than immigration.