Using Selection on Observed Variables to Assess Bias from Unobservables When Evaluating Swan-Ganz Catheterization by Joseph G. Altonji, Todd E. Elder and Christopher R. Taber. Published in volume 98, issue 2, pages 345-50 of American Economic Review, May 2008
Although poverty research has a very long history in the social sciences, serious debate on the sufficiency of economic growth to eliminate poverty was rekindled by the inception of the “War on Poverty” by the Kennedy and Johnson Administrations during the early 1960s. Forty years later, the measurement of growth’s effect on poverty remains an important input to the policy question of whether, how much, and how govern ment efforts should address poverty reduction. Early work by Henry J. Aaron (1967) found that poverty among certain groups seemed highly sensitive to economic growth, while other groups were barely affected. Subsequent researchers have realized that poverty has a spa tial as well as a demographic dimension, and more recent work has examined poverty by “race and region” using disaggregated time series. The present study further refines the examination of poverty by racial/ethnic group and region by investigating the impact of economic progress on poverty across black, Hispanic, and white populations measured over 35 years at the level of the census region. To our knowledge, this is the first research to study all three of these groups using regional data. A regional analysis is important because the North, Midwest, South, and West have had different industrial structures and different economic histories over the last three decades. As shown in Figure 1, regional poverty rates of blacks and Hispanics relative to whites are quite different. Moreover, regional differences exist in the levels and growth rates of real per capital GDP, in the secular decline in manufac turing, and in the pattern of the unemployment rate. In addition to economic events, we control Non-White Poverty and Macroeconomy: The Impact of Growth
Measuring the Labor Market Impacts of Hurricane Katrina Migration: Evidence from Houston, Texas by Molly Fifer McIntosh. Published in volume 98, issue 2, pages 54-57 of American Economic Review, May 2008
While terrorist attacks are relatively infrequent, Gary Becker and Yona Rubinstein (2008) provide evidence that they generate a disproportionate amount of stress and fear, suggesting that the indirect effects may be far more reaching than the direct effects. The international organization Medecins Sans Frontieres (2006) claims that the physiological effect of civil conflict is Colombian’s worst public health problem. This paper is the first attempt to measure the effect of prenatal psychological stress due to terrorism on child birth outcomes. The medical literature indicates that prenatal stress increases levels of CorticotrophinReleasing Hormone (CRH), which regulates the duration of pregnancy and fetal maturation and thus increases the risk of adverse birth outcomes (Pathik D. Wadhwa et al. 1993, among others). There is also evidence that birth outcomes are most sensitive to maternal stress in early stages of pregnancy (Laura M. Glynn et al. 2001). This study finds that the intensity of random landmine explosions during a woman’s first trimester of pregnancy has a significant negative impact on child birth weight. This finding persists when mother fixed effects are included, suggesting that neither observable nor unobservable characteristics of the mothers are driving the results. I use a large dataset, comprising approximately 4 million births in Colombia from 1998 to 2003, which enables me to observe multiple births by the same mother and gives strong statistical power to discern patterns. The data also allow me to link the date of a landmine explosion with the trimester of the pregnancy, and thereby to identify the stage of pregnancy Stress and Birth Weight: Evidence from Terrorist Attacks
Allowing the Data to Speak Freely: The Macroeconometrics of the Cointegrated Vector Autoregression by Kevin D. Hoover, Soren Johansen and Katarina Juselius. Published in volume 98, issue 2, pages 251-55 of American Economic Review, May 2008
Optimal Life-Cycle Investing with Flexible Labor Supply: A Welfare Analysis of Life-Cycle Funds by Francisco J. Gomes, Laurence J. Kotlikoff and Luis M. Viceira. Published in volume 98, issue 2, pages 297-303 of American Economic Review, May 2008
International relative prices across industrialized countries show large and systematic deviations from relative purchasing power parity. We embed a model of imperfect competition and variable markups in a quantitative model of international trade. We find that when our model is parameterized to match salient features of the data on international trade and market structure in the United States, it can reproduce deviations from relative purchasing power parity similar to those observed in the data because firms choose to price-to-market. We then examine how pricing-to-market depends on the presence of international trade costs and various features of market structure.
The original purpose of the former was to help post-World War II reconstruction, the purpose of the latter was to help revive global trade while averting the “beggar-thy-neighbor ” exchange rate policies that characterized the inter-war years. Over the years, the World Bank has refocused on helping poor countries grow while the Fund broadly attempts to foster country policies that ensure macroeconomic stability and limit adverse spillovers to the rest of the world. It still is in the world’s self interest to reduce poverty and economic instability in all countries, not just because their effects spread through trade but also because they can be sources of conflict and terrorism, of politically difficult immigration and of environmental degradation. But can multilateral financiers like the World Bank and the IMF help attain these goals? In the past, they contributed through loans and through economic advice, with the former being the lever through which multilateral institutions forced countries to accept the latter. Over the years, the value of both contributions has eroded, as I will discuss. Multilateral institutions will have to change, doing old tasks in new ways as also performing new tasks such as slowing climate change. Critical to their transformation will be the attitudes of the countries that play the largest role in their governance. These then are the subject of the rest of the paper.
How and to what extent “neuroeconomic” data (broadly interpreted as data other than standard choice data) should be used in advancing economic theory is open to question. Several authors have attempted to make use of such nonstandard data to shed light on the process of economic decision making. John W. Payne, James R. Bettman, and Eric. J. Johnson (1993), Miguel Costa Gomes, Vincent P. Crawford, and Bruno Broseta (2001), and Xavier Gabaix et al. (2006) have used MouseLab software in order to determine the manner in which people use information. Joseph Wang, Michael Spezio, and Colin Camerer (2006) make use of eye-tracking data for the same purpose. More dramatically, researchers such as Paul William Glimcher, Joseph Kable, and Kenway Louie (2007) are using brain-scanning data in an attempt to constrain economic models of discounting and time preference. Camerer (forthcoming) presents an excellent review of economic research involving nonstandard data. In opposition to this trend, Faruk Gul and Wolfgang Pesendorfer (forthcoming) present a strong critique of the use of nonchoice data within economics. They put forward two specific arguments that users of “neuroeconomic” data must refute if their work is to be taken seriously. First—economic models were designed only to explain choices. Thus, nonchoice data can be used neither to confirm nor deny a particular economic model. Second, it is by and large true that economists are interested in choice behavior. Any two models will either make different predictions for choice, in which case they can be differentiated by standard choice data, or they will not, in which case an economist will not be interested in differentiating between them. Economic Insights from “Neuroeconomic” Data
We examine the risky choices of contestants in the popular TV game show "Deal or No Deal" and related classroom experiments. Contrary to the traditional view of expected utility theory, the choices can be explained in large part by previous outcomes experienced during the game. Risk aversion decreases after earlier expectations have been shattered by unfavorable outcomes or surpassed by favorable outcomes. Our results point to reference-dependent choice theories such as prospect theory, and suggest that path-dependence is relevant, even when the choice problems are simple and well defined, and when large real monetary amounts are at stake.