Knowledge that Transforms

We study the political impact of commercial television in Italy exploiting the staggered introduction of Berlusconi’s private TV network, Mediaset, in the early 1980s. We find that individuals with early access to Mediaset all-entertainment content were more likely to vote for Berlusconi’s party in 1994, when he first ran for office. The effect persists for five elections and is driven by heavy TV viewers, namely the very young and the elderly. Regarding possible mechanisms, we find that individuals exposed to entertainment TV as children were less cognitively sophisticated and civic-minded as adults, and ultimately more vulnerable to Berlusconi’s populist rhetoric. (JEL D72, L82, M31, Z13)

We consider a linear panel event-study design in which unobserved confounds may be related both to the outcome and to the policy variable of interest. We provide sufficient conditions to identify the causal effect of the policy by exploiting covariates related to the policy only through the confounds. Our model implies a set of moment equations that are linear in parameters. The effect of the policy can be estimated by 2SLS, and causal inference is valid even when endogeneity leads to pre-event trends (“pre-trends”) in the outcome. Alternative approaches perform poorly in our simulations. (JEL C23, C26)

I argue that the winners and losers from trade are decided primarily by occupation. In addition to fixed adjustment costs, workers build up specific human capital over time that is destroyed when they must change occupations. I show that ignoring human capital biases estimates of adjustment costs upward by a factor of 3. Estimating an occupational choice model of the Danish labor market, I show that 57 percent of the dispersion in worker outcomes is accounted for by occupations, and only 16 percent by sectors. Finally, the model suggests that rising import competition from 1995–2005 reduced lifetime earnings for 5 percent of workers. (JEL F14, F16, J24, J31)

We study a generous program to promote the adoption of solar photovoltaic (PV) systems through subsidies on future electricity production, rather than through upfront investment subsidies. We develop a tractable dynamic model of new technology adoption, also accounting for local market heterogeneity. We identify the discount factor from demand responses to variation that shifts expected future but not current utilities. Despite the massive adoption, we find that households significantly discounted the future benefits from the new technology. This implies that an upfront investment subsidy program would have promoted the technology at a much lower budgetary cost. (JEL C51, D15, Q48, Q58)

This paper provides a comprehensive assessment of the margins along which firms responded to a large and persistent minimum wage increase in Hungary. We show that employment elasticities are negative but small even four years after the reform; that around 75 percent of the minimum wage increase was paid by consumers and 25 percent by firm owners; that firms responded to the minimum wage by substituting labor with capital; and that disemployment effects were greater in industries where passing the wage costs to consumers is more difficult. We estimate a model with monopolistic competition to explain these findings. (JEL J23, J24, J31, J38, L13)

A decision maker needs to reach a decision and relies on an expert to acquire information. Ideal actions of expert and decision maker are partially aligned and the expert chooses what to learn about each. The decision maker can either get advice from the expert or delegate decision making to him. Under delegation, the expert learns his privately optimal action and chooses it. Under communication, advice based on such information is discounted, resulting in losses from strategic communication. We characterize the communication problems that make the expert acquire information of equal use to expert and decision maker. In these problems, communication outperforms delegation. (JEL D82, D83)

We present a new identity that relates expected exchange rate appreciation to a risk-neutral covariance term, and use it to motivate a currency forecasting variable based on the prices of quanto index contracts. We show via panel regressions that the quanto forecast variable is an economically and statistically significant predictor of currency appreciation and of excess returns on currency trades. Out of sample, the quanto variable outperforms predictions based on uncovered interest parity, on purchasing power parity, and on a random walk as a forecaster of differential (dollar-neutral) currency appreciation. (JEL C53, E43, F31, F37, G12, G15)

This paper asks whether elite colleges help students outside of historically advantaged groups reach top positions in the economy. I combine administrative data on income and leadership teams at publicly traded firms with a regression discontinuity design based on admissions rules at elite business-focused degree programs in Chile. The 1.8 percent of college students admitted to these programs account for 41 percent of leadership positions and 39 percent of top 0.1 percent incomes. Admission raises the number of leadership positions students hold by 44 percent and their probability of attaining a top 0.1 percent income by 51 percent. However, these gains are driven by male applicants from high-tuition private high schools, with zero effects for female students or students from other school types with similar admissions test scores. Admissions effects are equal to 38 percent of the gap in rates of top attainment by gender and 54 percent of the gap by high school background for male students. A difference-in-differences analysis of the rates at which pairs of students lead the same firms suggests that peer ties formed between college classmates from similar backgrounds may play an important role in driving the observed effects. (JEL I23, I26, J16, O15)

I exploit a natural experiment in Indian schools to study how being integrated with poor students affects the social behaviors and academic outcomes of rich students. Using administrative data, lab and field experiments to measure outcomes, I find that having poor classmates makes rich students (i) more prosocial, generous, and egalitarian; and (ii) less likely to discriminate against poor students, and more willing to socialize with them. These effects are driven by personal interactions between rich and poor students. In contrast, I find mixed but overall modest impacts on rich students’ academic achievement. (JEL C90, D31, I21, I24, O15, Z13)

We combine national accounts, surveys, and new tax data to study the accumulation and distribution of income and wealth in China from 1978 to 2015. The national wealth-income ratio increased from 350 percent in 1978 to 700 percent in 2015, while the share of public property in national wealth declined from 70 percent to 30 percent. We provide sharp upward revision of official inequality estimates. The top 10 percent income share rose from 27 percent to 41 percent between 1978 and 2015; the bottom 50 percent share dropped from 27 percent to 15 percent. China’s inequality levels used to be close to Nordic countries and are now approaching US levels. (JEL D31, E01, E23, O11, P24, P26, P36)