Knowledge that Transforms

Recent studies using long-run restrictions question the validity of the technology-driven real business cycle hypothesis. We propose an alternative identification that maximizes the contribution of technology shocks to the forecast-error variance of labor productivity at a long but finite horizon. In small-sample Monte Carlo experiments, our identification outperforms standard long-run restrictions by significantly reducing the bias in the short-run impulse responses and raising their estimation precision. Unlike its long-run restriction counterpart, when our Max Share identification technique is applied to U.S. data, it delivers the robust result that hours worked responds negatively to positive technology shocks.

The causes of the Protestant Reformation have long been debated. This paper seeks to revive and econometrically test the theory that the spread of the Reformation is linked to the spread of the printing press. I test this theory by analyzing data on the spread of the press and the Reformation at the city level. An econometric analysis that instruments for omitted variable bias with a city's distance from Mainz, the birthplace of printing, suggests that cities with at least one printing press by 1500 were at minimum 29 percentage points more likely to be Protestant by 1600.

We investigate the impacts of providing low-income Chilean adolescents with information about how to finance higher education and ask whether providing parents with the same information magnifies the effects on schooling outcomes. We randomly assigned eighth graders and some parents to receive information about aid for higher education. Exposure to information raised college preparatory high school enrollment, primary school attendance, and financial aid knowledge, with gains concentrated among medium- and high-grade students. Parental exposure to information did not significantly magnify these effects. Our results demonstrate that access to relevant information about financial aid affects important schooling choices long before tertiary education begins.

We estimate the local spillovers from research university activity in a sample of urban counties. Our approach uses the interaction between university endowment values and stock market shocks over time for identification. We find statistically significant local spillover effects from university activity. The effects are significantly larger when local universities are more research intensive or local firms are technologically close to universities. Our results suggest that the longer-term effects that universities have on their local economies may grow over time as the composition of local industries adjusts to take advantage of the heterogeneous knowledge spillovers we identify.

Data linking 1972 and 1992 adolescent skill endowments to adult outcomes reveal increasing complementarity between cognitive and social skills. In fact, previously noted growth in demand for cognitive skills affected only individuals with strong endowments of both social and cognitive skills. These findings are corroborated using Census and CPS data matched with Dictionary of Occupational Titles (DOT) job task measures; employment in and earnings premia to occupations requiring high levels of both cognitive and social skill grew substantially compared with occupations that require only one or neither type of skill, and this emerging feature of the labor market has persisted into the new millennium.

This paper examines the relationship between the minimum high school dropout age and juvenile arrest rates by exploiting state-level variation in dropout age laws. County-level arrest data for the period 1980 to 2008 and difference-in-difference-in-difference-type empirical strategy are used to compare the arrest rates over time of various age groups within counties that differ by their state's minimum dropout age. The evidence suggests that minimum dropout age requirements have a significant and negative effect on property and violent crime arrest rates for individuals 16 to 18 years old. The results are consistent with an incapacitation effect of schooling.

This paper presents an analysis of mortgage delinquency between 2004 and 2008 using a loan-level data set from a major national mortgage bank. Our analysis highlights two problems underlying the mortgage crisis: a reliance on mortgage brokers who tend to originate lower-quality loans and a prevalence of low-documentation loans—known in the industry as “liar's loans”—that result in borrower information falsification. While over three-quarters of the difference in delinquency rates between bank and broker channels can be attributed to observable loan and borrower characteristics, the delinquency difference between full- and low-documentation mortgages is due to unobservable heterogeneity, about half of it potentially due to income falsification.

We investigate long-run effects of World War II on socio-economic status and health of older individuals in Europe. We analyze data from SHARELIFE, a retrospective survey conducted as part of SHARE in Europe in 2009. SHARELIFE provides detailed data on events in childhood during and after the war for over 20,000 individuals in 13 European countries. We construct several measures of war exposure-experience of dispossession, persecution, combat in local areas, and hunger periods. Exposure to war and more importantly to individual-level shocks caused by the war significantly predicts economic and health outcomes at older ages.

A model of racial discrimination provides testable implications for two features of statistical discriminators: differential treatment of signals by race and heterogeneous experience that shapes perception. We construct an experiment in the U.S. rental apartment market that distinguishes statistical discrimination from taste-based discrimination. Responses from over 14,000 rental inquiries with varying applicant quality show that landlords treat identical information from applicants with African American– and white-sounding names differently. This differential treatment varies by neighborhood racial composition and signal type in a manner consistent with statistical discrimination and in contrast to patterns predicted by a model of taste-based discrimination.

This paper investigates the long-run development of China's treaty ports from the mid-eighteenth century until today. Focusing on a sample of prefectures on the coast or on the Yangtze River, I document the dynamic development paths of treaty ports and their neighbors in alternate phases of closedness and openness. I also provide suggestive evidence on migration and sector-wise growth to understand the advantage of treaty ports in the long run.