Knowledge that Transforms

This paper uses the rollout of the first Community Health Centers (CHCs) to study the longer-term health effects of increasing access to primary care. Within ten years, CHCs are associated with a reduction in age-adjusted mortality rates of 2 percent among those 50 and older. The implied 7 to 13 percent decrease in one-year mortality risk among beneficiaries amounts to 20 to 40 percent of the 1966 poor/non-poor mortality gap for this age group. Large effects for those 65 and older suggest that increased access to primary care has longer-term benefits, even for populations with near universal health insurance.

Using state-level data from 1980-2010 we examine whether economic freedom, as measured by the Economic Freedom of North America Index, has had any impact in increasing or decreasing the ratio of median income for black households to the median income of white households. To our knowledge, there has been no research on racial income disparities and the role that economic freedom might have in alleviating or exacerbating the problem. We find evidence that economic freedom is associated with an increase in the racial income gap.

We extend traditional agency theory by exploring the roles for formal measures when managerial behavior is not governed by rules, formulas, or contracts. Part I describes relational incentive contracts with informal weights on formal performance measures. More importantly, it also explores how formal measures could be used in models of informal management, such as adaptation and coordination, politics and influence, leadership, and informal authority. Part II considers the benefits from allowing key stakeholders to develop their own, potentially inferior, performance measures. The collaboration to create a “balanced scorecard” of performance measures can help change an organization's culture.

We argue that US welfare would rise if unemployment insurance were increased for younger and decreased for older workers. This is because the young tend to lack the means to smooth consumption during unemployment and want jobs to accumulate high-return human capital. So unemployment insurance is most valuable to them, while moral hazard is mild. By calibrating a life cycle model with unemployment risk and endogenous search effort, we find that allowing unemployment replacement rates to decline with age yields sizeable welfare gains to US workers.

We study the direct and spillover effects of local state capacity in Colombia. We model the determination of state capacity as a network game between municipalities and the national government. We estimate this model exploiting the municipality network and the roots of local state capacity related to the presence of the colonial state and royal roads. Our estimates indicate that local state capacity decisions are strategic complements. Spillover effects are sizable, accounting for about 50 percent of the quantitative impact of an expansion in local state capacity, but network effects driven by equilibrium responses of other municipalities are much larger.

The conventional wisdom since Yaari (1965) is that households without a bequest motive should fully annuitize their investments. Numerous frictions do not break this sharp result. We modify the Yaari framework by allowing a household's mortality risk itself to be stochastic due to health shocks. A lifetime annuity still helps to hedge longevity risk. But the annuity's remaining present value is correlated with medical costs, such as those for nursing home care, thereby reducing annuity demand, even without ad-hoc liquidity constraints. We find that most households should not hold a positive level of annuities, and many should hold negative amounts.

While both cultural and legal norms (institutions) help foster cooperation, culture is the more primitive of the two and itself sustains formal institutions. Cultural changes are rarer and slower than changes in legal institutions, which makes it difficult to identify the role played by culture. Cultural changes and their effects are easier to identify in simpler, more controlled, environments, such as corporations. Corporate culture, thus, is not only interesting per se, but also as a laboratory to study the role of societal culture and the way it can be changed.

Secular stagnation on the supply side takes the form of a slow 1.6 percent annual growth rate of US potential real GDP, roughly half the 3.1 percent annual growth rate of actual real GDP realized from 1972 to 2004. This slowdown stems from a sharp decline in the growth rate of aggregate hours of work and of output per hour. This paper attributes the productivity growth decline to diminishing returns in the digital revolution that had its peak effect business hardware, software, and best practices in the late 1990s but has resulted in little change in those methods over the past decade.

We study the operation of local governments (Panchayats) in rural Maharashtra, India, using a survey that we designed for this end. Elections are freely contested, fairly tallied, highly participatory, non-coerced, and lead to appointment of representative politicians. However, beneath this veneer of ideal democracy we find evidence of deeply ingrained clientelist vote-trading structures maintained through extra-political means. Elite minorities undermine policies that would redistribute income toward the majority poor. We explore the means by which elites use their dominance of land ownership and traditional social superiority to achieve political control in light of successful majoritarian institutional reforms.

This paper empirically studies firm's strategic exit decisions in an environment where demand is declining. Specifically, I quantify the extent to which the exit process generated by firms' strategic interactions deviates from the outcome that maximizes industry profits. I develop and estimate a dynamic exit game using data from the US movie theater industry in the 1950s, when the industry faced demand declines. Using the estimated model, I quantify the magnitude of strategic delays and find that strategic interactions cause an average delay of exit of 2.7 years. I calculate the relative importance of several components of these strategic delays.