Knowledge that Transforms

We use variation from the minimum legal drinking age to estimate the causal effect of access to alcohol on crime. Using a census of arrests in California and a regression discontinuity design, we find that individuals just over age 21 are 5.9% more likely to be arrested than individuals just under 21. This increase is mostly due to assaults, alcohol-related offenses, and nuisance crimes. These results suggest that policies that restrict access to alcohol have the potential to substantially reduce crime.

This paper examines the factors that give rise to intermediaries in exporting and explores the implications for trade volumes. Export intermediaries such as wholesalers serve different markets and export different products than manufacturing exporters do. Wholesalers are more prevalent in markets with higher destination-specific fixed costs and focus on products that are less differentiated, have lower contract intensity, and have large sunk entry costs. Aggregate exports to destinations with high shares of indirect exports are less responsive to changes in the real exchange rate than are exports to markets served primarily by direct exporters.

We derive testable implications of instrument validity in just identified treatment effect models with endogeneity and consider several tests. The identifying assumptions of the local average treatment effect allow us to both point identify and bound the mean potential outcomes of the always takers under treatment and the never takers under nontreatment. The point-identified means must lie within their respective bounds, which provides us with four testable inequality moment constraints. Finally, we adapt our testing framework to the identification of distributional features. A brief simulation study and an application to labor market data are also provided.

While innovation matters for competitiveness, it may expose firms to survival risks. Using plant-product data for Chile and discretetime hazard models, we show that innovating plants have a lower hazard of exit. However, risk has a strong impact on the innovation-exit relationship: only innovators that retain diversified sources of revenue or face lower market risk are less likely to die. Single-product innovators are at greater risk of exiting. Exposure to technical risk does not affect exit probabilities differentially. We provide tentative evidence that singleproduct innovators have higher profits, which helps to rationalize their innovation decision despite the increased risk of exit.

Using data from employer-provided health insurance and Medicare Part D, we investigate whether healthcare utilization responds to the dynamic incentives created by the nonlinear nature of health insurance contracts. We exploit the fact that, because annual coverage usually resets every January, individuals who join a plan later in the year face the same initial ("spot") price of healthcare but a higher expected end-of-year ("future") price. We find a statistically significant response of initial utilization to the future price, rejecting the null that individuals respond only to the spot price. We discuss implications for analysis of moral hazard in health insurance.

We implemented a randomized field experiment that tested ways to stimulate migrants’ savings in their origin country. We find that migrants value opportunities to exert greater control over financial activities in their home countries. We offered U.S.-based migrants bank accounts in El Salvador, randomly varying migrant control over El Salvador–based savings by offering different accounts across treatments. Migrants offered the greatest degree of control accumulated the most savings. Impacts likely represent increases in total savings; there is no evidence that savings increases were simply reallocated from other savings mechanisms. Enhanced control over home country savings does not affect remittances sent home.

The Fair Trade (FT) coffee initiative attempts to channel charity from consumers to poor producers via increased prices. We show that the rules of the FT system permit this rent to be eliminated due to free entry and costly excess certification of output. Using data from an association of coffee cooperatives in Central America, we verify that expected producer benefits are close to 0 when we take into account the output that is certified but not sold as FT. Our results illustrate how free entry undermines the attempt at extending charity via a price distortion in an otherwise competitive market.

Using geographically disaggregated data and exploiting an instrumental variable strategy, we show that contrary to conventional wisdom, the benefits of the 1990 Clean Air Act Amendments (CAAA) were progressive. The CAAA created incentives for local regulators to target the initially dirtiest areas for cleanup, creating heterogeneity in the incidence of air quality improvements that favored lower-income households. Based on house price appreciation, households in the lowest quintile of the income distribution received annual benefits from the program equal to 0.3% of their income on average during the 1990s, over twice as much as those in the highest quintile.

We use unique longitudinal data to document an economically and statistically significant positive correlation between the facial attractiveness of male high school graduates and their subsequent labor market earnings. There are only weak links between facial attractiveness and direct measures of cognitive skills and no link between facial attractiveness and mortality. Even after including a lengthy set of characteristics, including IQ, high school activities, proxy measures for confidence and personality, family background, and additional respondent characteristics in an empirical model of earnings, the attractiveness premium is present in the respondents' mid-30s and early 50s. Our findings are consistent with attractiveness being an enduring, positive labor market characteristic.

We exploit daylight saving time (DST) as an exogenous shock to daylight, using both the discontinuous nature of the policy and the 2007 extension of DST, to consider the impact of light on criminal activity. Regression discontinuity estimates show a 7% decrease in robberies following the shift to DST. As expected, effects are largest during the hours directly affected by the shift in daylight. We discuss our findings within the context of criminal decision making and labor supply, and estimate that the 2007 DST extension resulted in $59 million in annual social cost savings from avoided robberies.