Knowledge that Transforms

This paper studies the political influence of individual firms on congressional decisions to suspend tariffs on U.S. imports of intermediate goods. We develop a legislative bargaining model in which firms influence legislators by transmitting information about the value of protection, using verbal messages and lobbying expenditures. Model estimation using firmlevel data on tariff suspension bills and lobbying expenditures reveals that the probability a suspension is granted decreases with each additional firm that expresses opposition. This effect is significantly larger than that of either opponent or proponent lobbying due to the greater information content of verbal opposition and legislative bargaining costs.

We provide evidence that choices over small-stakes bets are consistent with assumptions of some payoff calibration paradoxes. We then exploit the existence of detailed information on individual wealth of our experimental subjects in Denmark and directly estimate risk attitudes and the degree of asset integration. We discover that behavior is consistent with partial, rather than full, asset integration. The implied risk attitudes from estimating these specifications indicate risk premiums and certainty equivalents that are a priori plausible. This theory and evidence suggest one constructive solution to payoff calibration paradoxes.

This study assesses whether workplace pensions help individuals overcome knowledge barriers to saving for retirement. Using administrative data from Canada and exploiting unique features of the pension system, I find compelling evidence that each $1 contributed to workplace pensions partially crowds out other retirement saving by approximately $0.50—among interior savers—in a regression kink design, centering on unionized workers for methodological reasons. Further analysis indicates that active versus passive decisions are influenced by education, exploiting compulsory schooling reforms for identification. I conclude by showing that pension and education reform are both viable mechanisms for boosting saving from a life cycle perspective.

We develop and estimate a general equilibrium model to assess the effects and welfare implications of central bank transparency. Monetary policy can deviate from active inflation stabilization, and agents conduct Bayesian learning about the nature of these deviations. Under constrained discretion, only short deviations occur, agents’ uncertainty about the macroeconomy remains contained, and welfare is high. However, if a deviation persists, uncertainty eventually accelerates and welfare declines. Announcing that inflation stabilization will be temporarily abandoned raises uncertainty. However, these announcements lower policy uncertainty and curb inflationary beliefs at the end of the policy. For the United States, enhancing transparency raises welfare.

We exploit a quasi-natural experiment of military draftees in Russia during World War I to examine the effects of a massive, negative labor shock on agricultural production. Employing a novel district-level panel data set, we find that mass mobilization produces a dramatic decrease in cultivated area. Surprisingly, farms with communal land tenure exhibit greater resilience to the labor shock than private farms. The resilience stems from peasants reallocating labor in favor of the commune because of the increased attractiveness of its nonmarket access to land and social insurance. Our results support an institutional explanation of factor misallocation in agriculture.

Ambiguity attitudes have been prominently used in economic models, but we still know little about their demographic correlates or their generalizability beyond the West. We analyze the ambiguity attitudes of almost 3,000 students across thirty countries. For gains, we find ambiguity aversion everywhere, while ambiguity aversion is much weaker for losses. Ambiguity attitudes change systematically with probabilities for both gains and losses. Much of the between-country variation can be explained through a fewmacroeconomic characteristics. In contrast, we find massive unexplained variation at the individual level. We also find much unexplained heterogeneity in individual responses to different decision tasks. © 2018 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Abstract In speedboat racing in Japan, men and women compete under the same conditions and are randomly assigned to mixed-sex or single-sex groups for each race. We use a sample of over 140,000 individual-level records to examine how male-dominated circumstances affect women’s racing performance. Our fixed-effects estimates reveal that women’s race time is slower in mixed-sex than all-women races, whereas men’s race time is faster in mixed-sex than men-only races. The same result is found for place in race. Moreover, in mixed-sex races, men are more aggressive, as proxied by lane changing, than women in spite of the risk of being penalized for rule infringement.

High-impact policies may not lead to support for the political party that introduces them. In 2008, Uganda’s government encouraged groups of youth to submit proposals to start enterprises. Of 535 eligible groups, a random 265 received grants of nearly $400 per person. Prior work showed that after four years, the Youth Opportunities Program raised employment by 17% and earnings by 38%. Here we show that recipients were no more likely to support the ruling party in elections. Rather, recipients slightly increased campaigning and voting for the opposition. Potential mechanisms include program misattribution, group socialization, and financial independence freeing voters from transactional voting.

The unemployment rate is one of the most important business cycle indicators, but its interpretation can be difficult because slow changes in the demographic composition of the labor force affect the level of unemployment and make comparisons across business cycles difficult. To purge the unemployment rate from demographic factors, labor force shares are routinely used to control for compositional changes. This paper shows that this approach is ill defined, because the labor force share of a demographic group is mechanically linked to that group's unemployment rate, as both variables are driven by the same underlying worker flows. We propose a new demographic-adjustment procedure that uses a dynamic factor model for the worker flows to separate aggregate labor market forces and demographic-specific trends. Using the U.S. labor market as an illustration, our demographic-adjusted unemployment rate indicates that the 2008–2009 recession was much more severe and generated substantially more slack than the early 1980s recession.

This paper exploits policy discontinuities at U.S. state borders to examine the effect of R&D investments on innovative projects. We examine the Small Business Innovation Research (SBIR) State Match program, which offers noncompetitive grants to federally awarded SBIR Phase I projects that are eligible to compete for Phase II. Results from SBIR activity (2002–2010) indicate heterogeneous treatment effects. Notably, the positive differential effects are moderated by firms within the science and health fields and with less previous SBIR success. The State Match effectively stabilized Phase II trends in contrast to neighboring states that experienced greater declines from the concurrent recession.