Data Source

Anti-Piketty:

Have passive rentiers replaced the working rich at the top of the U.S. income distribution? Using administrative data linking 10 million firms to their owners, this paper shows that private business owners who actively manage their firms are key for top income inequality. Private business income accounts for most of the rise of top incomes since 2000 and the majority of top earners receive private business income—most of which accrues to active owner-managers of mid-market firms in relatively skill-intensive and unconcentrated industries. Profit falls substantially after premature owner deaths. Top-owned firms are twice as profitable per worker as other firms despite similar risk, and rising profitability without rising scale explains most of their profit growth. Together, these facts indicate that the working rich remain central to rising top incomes in the twenty-first century.

That is from a new paper by Matthew Smith, Danny Yagan, Owen Zidar, and Eric Zwick, via the excellent Kevin Lewis.

Using smartphone-tracking data and precinct-level voting, we show that politically divided families shortened Thanksgiving dinners by 20-30 minutes following the divisive 2016 election. This decline survives comparisons with 2015 and extensive demographic and spatial controls, and more than doubles in media markets with heavy political advertising. These effects appear asymmetric: while Democratic voters traveled less in 2016, political differences shortened Thanksgiving dinners more among Republican voters, especially where political advertising was heaviest. Partisan polarization may degrade close family ties with large aggregate implications; we estimate 27 million person-hours of cross-partisan Thanksgiving discourse were lost in 2016 to ad-fueled partisan effects.

That is from a new paper by M. Keith Chen and Ryne Rohla, via the excellent Kevin Lewis.

Using all French court decisions from 2002–2014 with 6 million decisions, we estimate significant impact on sentence lengths, but mainly for those defendants present at trial—equivalent to 3.5 days reduction. The average sentence length is 95 days. Focusing on the three-month threshold (the median sentence length), defendants are 1.6% less likely to be sentenced above this threshold on their birthday. Including controls for gender, crime, age, and nationality, the effect is 1.1% and remains statistically significant at the 5% level. Disaggregating the components of the sentence length reveals the impact is greatest on probation sentences–defined as the prison sentence people get in case of violation of their probation. Notably, individuals with drug offenses—but not violent offenses—benefit from this judicial leniency. They are 5% less likely to have sentences above three-months if sentenced on their birthday and appearing at trial.

For the United States, the birthday effect shows up only for the “days” component of the sentence, not for the “months” component.

That is all from a paper by Daniel L. Chen and Arnaud Philippe, via Robert Dur.

There is a new NBER working paper on these topics, by Anna Chorniy, Janet Currie, and Lyudmyla Sonchak, here is the abstract:

In the U.S., nearly 11% of school-age children have been diagnosed with ADHD, and approximately 10% of children suffer from asthma. In the last decade, the number of children diagnosed with these conditions has inexplicably been on the rise. This paper proposes a novel explanation of this trend. First, the increase is concentrated in the Medicaid caseload nationwide. Second, nearly 80% of states transitioned their Medicaid programs from fee-for-service (FFS) reimbursement to managed care (MMC) by 2016. Using Medicaid claims from South Carolina, we show that this change contributed to the increase in asthma and ADHD caseloads. Empirically, we rely on exogenous variation in MMC enrollment due a change in the “default” Medicaid plan from FFS or MMC, and an increase in the availability of MMC. We find that the transition from FFS to MMC explains most of the rise in the number of Medicaid children being treated for ADHD and asthma. These results can be explained by the incentives created by the risk adjustment and quality control systems in MMC.

The economics of medical diagnoses remain a drastically understudied area.

Here is a new and very important paper by Yuyu Chen and David Y. Yang (and note how they named the link):

Media censorship is a hallmark of authoritarian regimes. We conduct a field experiment in China to examine whether providing access to an uncensored Internet leads citizens to acquire politically sensitive information, and whether they are affected by the information. We track subjects’ media consumption, beliefs regarding the media, economic beliefs, political attitudes, and behaviors over 18 months. We find 4 main results: (i) free access alone does not induce subjects to acquire politically sensitive information; (ii) temporary encouragement leads to a persistent increase in acquisition, indicating that demand is not permanently low; (iii) acquisition brings broad, substantial, and persistent changes to knowledge, beliefs, attitudes, and intended behaviors; and (iv) social transmission of information is statistically significant but small in magnitude. We calibrate a simple model to show that, due to the low demand for, and moderate social transmission of, uncensored information, China’s censorship apparatus may remain robust for a large number of citizens receiving unencouraged access to an uncensored Internet.

Those results are fully consistent with my own anecdotal observations.

That is part of the title of a new paper by Sharat Ganapati, here is the abstract:

American industries have grown more concentrated over the last few decades, driven primarily by the growth of the very largest firms. Classical economics implies that this should lead to hikes in prices, reduction in output, and decreases in consumer welfare. I investigate forty years of data from 1972-2012 using publicly available market shares and price indices for both the manufacturing and non-manufacturing sectors and find mixed evidence. Manufacturing concentration increases are indeed correlated with slightly higher prices, but not lower output. However concentration increases are correlated with increases in productivity, offsetting a large portion of the price increase. In contrast, non-manufacturing concentration increases over the last twenty years are not correlated with observable price changes, but are correlated with increases in output.

In other words, the output restrictions are not there.  The amazing thing is that, over the last few years, I have seen a few dozen journalists and also economists handle this question, without ever asking much less trying to answer this question (Noah Smith being an exception).

There is a new paper on that topic by Bert Van Landeghem at Sheffield, here are the main results:

A large number of empirical studies have investigated the link between social status and happiness, yet in observational data identification challenges remain severe. This study exploits the fact that in India people are assigned a caste from birth. Two identical surveys of household heads (each with N=1000) in rural Punjab and Andhra Pradesh show an increasing pattern in economic welfare across the hierarchy of castes. This illustrates that at least in rural regions, one’s caste is still an important determinant for opportunities in life. Subsequently, we find that the castes at the top are clearly more satisfied than the lower and middle castes. This result, which is in line with predictions of all major social comparison theories, is robust across the two case studies. The pattern across low and middle castes, however, is less clear, reflecting the complex theoretical relationship between being of middle rank on the one hand, and behaviour, aspirations and well-being on the other hand. In the Punjab sample, we even find a significant U-shape, the middle castes being the least happy. Interestingly, these patterns resemble those found for Olympic Medalists (first documented by Medvec et al. 1995).

I am looking forward to my conversation with Sujatha Gidla.

We use a machine learning algorithm to identify potential social capital measures that best predict neighborhood-level variation in labor market networks. We find evidence suggesting that smaller and less centralized schools, and schools with fewer poor students, foster social capital that builds labor market networks, as does a larger Republican vote share. The presence of establishments in a number of non-profit oriented industries are identified as predictive of strong labor market networks, likely because they either provide public goods or facilitate social contacts. These industries include, for example, churches and other religious institutions, schools, country clubs, and amateur or recreational sports teams or clubs.

That is from a new NBER working paper by Brian J. Asquith, Judith K. Hellerstein, Mark J. Kutzbach, and David Neumark.

Replication is critical for scientific progress and integrity but incentives for replication have been low. It’s good news, therefore, that a new journal will be devoted solely to replication research:

The International Journal for Re-Views in Empirical Economics (IREE) is the first journal dedicated to the publication of replication studies based on economic micro-data. Furthermore, IREE publishes synthesizing reviews, micro-data sets and descriptions thereof, and articles dealing with replication methods and the development of standards for replications.

As yet, authors of replication studies, data sets and descriptions had a hard time gaining recognition for their work by citable publications and incentives for conducting these important kinds of work were immensely reduced….IREE provides the platform to authors to be given credit for serious empirical research in economics.

The publication of replication studies often depends on their result….replications usually need to reject the original study to get published whereas a scientific impact is denied for replications confirming original findings. This induces a severe publication bias….Therefore, IREE publishes research independent of the result of the study. The selection of published articles is based on technical and formal criteria but not with regards to the qualitative and quantitative results.

Deaton, Wooldridge, and Easterlin are all involved.

Hat tip: David Roodman on twitter.

Addendum: Also check out the the inaugural Empirical Legal Studies Replication Conference which will publish papers, independent of result, in an edition of the International Review of Law and Economics.

Already, there are 14,000 one-story cinder block Dollar Generals in the U.S.—outnumbering by a few hundred the coffee chain’s domestic footprint. Fold in the second-biggest dollar chain, Dollar Tree, and the number of stores, 27,465, exceeds the 22,375 outlets of CVS, Rite Aid, and Walgreens combined.

Here is the full Bloomberg piece, by Mya Frazier.  One point here is that “retail concentration,” which we do observe in the data, is unlikely to lead to very high prices.  A subtler point is that the dollar store sector itself is somewhat concentrated.  But that is yet another way of seeing why concentration indices can be misleading: “They’ve taken over a big chunk of the nation’s dollar stores!” isn’t exactly a recipe for sustained high prices, if anything the contrary.  Yet another point is that we may be rather deliberately moving to an uglier but cheaper world.

That is a new and important piece by Zachary Mabel and Tolani A. Britton, here is the abstract:

Research on college dropout has largely addressed early exit from school, even though a large share of students who do not earn degrees leave after their second year. In this paper, we offer new evidence on the scope of college late departure. Using administrative data from Florida and Ohio, we conduct an event history analysis of the dropout process as a function of credit attainment. Our results indicate that late departure is widespread, particularly at two- and open-admission four-year institutions. We estimate that 14 percent of all entrants to college and one-third of all dropouts completed at least three-quarters of the credits that are typically required to graduate before leaving without a degree. Our results also indicate that the probability of departure spikes as students near the finish line. Amidst considerable policy attention towards improving student outcomes in college, our findings point to promising new avenues for intervention to increase postsecondary attainment.

Here are ungated copies of the paper. I take these numbers as implicit evidence for an “acculturation” theory of education, where close to the end of the process some people decide they don’t want to join the “people with a college degree community.”

For the pointer I thank the excellent Kevin Lewis.

I am not sure I trust any TFP measures (what if innovation is simply embodied in investment?), but this paper by Gerben Bakker, Nicholas Crafts, and Pieter Woltjer is worth a ponder:

We develop new aggregate and sectoral Total Factor Productivity (TFP) estimates for the United States between 1899 and 1941 through better coverage of sectors and better-measured labor quality, and find TFP-growth was lower than previously thought, broadly based across sectors, and strongly variant intertemporally. We then test and reject three prominent claims. First, the 1930s did not have the highest TFP-growth of the twentieth century. Second, TFP-growth was not predominantly caused by four ‘great inventions’. Third, TFP-growth was not driven indirectly by spillovers from great inventions such as electricity. Instead, the creative-destruction -friendly American innovation system was the main productivity driver.

For the pointer I thank David Levey.

That is a new NBER Working Paper by Atila Abdulkadiroglu, Parag A. Pathak, Jonathan Schellenberg, and Christopher R. Walters, on a much understudied topic.  Here are their main results:

School choice may lead to improvements in school productivity if parents’ choices reward effective schools and punish ineffective ones. This mechanism requires parents to choose schools based on causal effectiveness rather than peer characteristics. We study relationships among parent preferences, peer quality, and causal effects on outcomes for applicants to New York City’s centralized high school assignment mechanism. We use applicants’ rank-ordered choice lists to measure preferences and to construct selection-corrected estimates of treatment effects on test scores and high school graduation. We also estimate impacts on college attendance and college quality. Parents prefer schools that enroll high-achieving peers, and these schools generate larger improvements in short- and long-run student outcomes. We find no relationship between preferences and school effectiveness after controlling for peer quality.

You can read that as the parents either being super-smart about what helps their kids — better peers — or the parents being snobby per se.  Either way, they don’t seem to care so much about value-added from the side of the school.  Or is peer quality actually also the best practical-for-parents measure of value-added, when all is said and done?

So I say this is an inconclusive result from the final normative point of view, but a highly significant result in terms of cementing in some knowledge close to what I already expected was the case.

It seems to have been a largely pro-education, egalitarian development, at least according to a new research paper by Richard Murphy, Judith Scott-Clayton, and Gillian Wyness:

Despite increasing financial pressures on higher education systems throughout the world, many governments remain resolutely opposed to the introduction of tuition fees, and some countries and states where tuition fees have been long established are now reconsidering free higher education. This paper examines the consequences of charging tuition fees on university quality, enrollments, and equity. To do so, we study the English higher education system which has, in just two decades, moved from a free college system to one in which tuition fees are among the highest in the world. Our findings suggest that England’s shift has resulted in increased funding per head, rising enrollments, and a narrowing of the participation gap between advantaged and disadvantaged students. In contrast to other systems with high tuition fees, the English system is distinct in that its income-contingent loan system keeps university free at the point of entry, and provides students with comparatively generous assistance for living expenses. We conclude that tuition fees, at least in the English case supported their goals of increasing quality, quantity, and equity in higher education.

I have long been of the view that free tuition for U.S. state schools would be an educational disaster.

This paper from last year somehow I neglected to blog, here is the abstract:

We exploit a volcanic “experiment” to study the costs and benefits of geographic mobility. We show that moving costs (broadly defined) are very large and labor therefore does not flow to locations where it earns the highest returns. In our experiment, a third of the houses in a town were covered by lava. People living in these houses where much more likely to move away permanently. For those younger than 25 years old who were induced to move, the “lava shock” dramatically raised lifetime earnings and education. Yet, the benefits of moving were very unequally distributed within the family: Those older than 25 (the parents) were made slightly worse off by the shock. The large gains from moving for the young are surprising in light of the fact that the town affected by our volcanic experiment was (and is) a relatively high income town. We interpret our findings as evidence of the importance of comparative advantage: the gains to moving may be very large for those badly matched to the location they happened to be born in, even if differences in average income are small.

That is from an NBER paper by Emi Nakamura, Jósef Sigurdsson, and Jón Steinsson.  There will someday be a Puerto Rican version of this study.