Month: April 2018
Could John McCain have been elected president?
If the supply of mortgage credit had not contracted from 2004 to 2008, McCain would have received half the votes needed in nine crucial swing states to reverse the outcome of the election. The effect on voting in these swing states from local contractions in mortgage credit supply was five times as important as the increase in the unemployment rate; if unemployment had not increased from 2004 to 2008, that improvement in local labor markets would only have given McCain only 9% of the votes needed to win the nine crucial swing states.
Here is more from Alexis Antoniades and Charles W. Calomiris.
The new Census study on the minimum wage
By Kevin Rins and John Voorheis, this is one of the most thorough and detailed studies to date. Here is one excerpt:
…we find that raising the minimum wage increases earnings growth at the bottom of the distribution, and those effects persist and indeed grow in magnitude over several years. This finding is robust to a variety of specifications, including alternatives commonly used in the literature on employment effects of the minimum wage.
How does their work differ from other treatments?:
Most public datasets commonly used in the minimum wage literature have limited ability to address how earnings growth responds to minimum wage increases because they are either composed of repeated cross-sections or have panel dimensions that cover relatively limited periods of time.
My personal view still is that the next generation of firms likely will create fewer jobs, and aggregate output and employment will be lower. I would rather look for measures that boost both efficiency and equity, and not just along the shorter time horizons. But on the pro-minimum wage side, you should consider that those immediately affected by the wage hike do seem better off, and their higher income in the meantime may itself bring some efficiency-enhancing gains.
Sentences about dairy
But there has never been a culture more dependent on milk than the desert nomads known as the Bedouins.
And originally, ice cream was only for aristocrats.
Others [in 18th century France] called ice cream fromage.
Jefferson liked to serve ice cream on sponge cake with a lightly baked meringue on top.
The United States became the ice cream country.
Fidel Castro took a personal interest in developing Cuban ice cream, and he was determined that Cuba would make better ice cream than the United States.
Ice cream is in general more profitable than milk, but ice cream cones are one of the more profitable ways to sell ice cream.
Those are all from the newly forthcoming and entertaining Mark Kurlansky book Milk: A 10,000 Year Food Fracas.
Regression Discontinuity Works
Robert Lalonde’s famous 1986 paper, Evaluating the Econometric Evaluations of Training Programs with Experimental Data, shattered the confidence of the profession by showing that the advanced econometric techniques of the day, by and large, failed to recover the results from a randomized controlled trial. The profession has been busy since that time developing new methods and techniques.
A new paper compares regression discontinuity with RCTs and RD works very well.
Theory predicts that regression discontinuity (RD) provides valid causal inference at the cutoff score that determines treatment assignment. One purpose of this paper is to test RD’s internal validity across 15 studies. Each of them assesses the correspondence between causal estimates from an RD study and a randomized control trial (RCT) when the estimates are made at the same cutoff point where they should not differ asymptotically. However, statistical error, imperfect design implementation, and a plethora of different possible analysis options, mean that they might nonetheless differ. We test whether they do, assuming that the bias potential is greater with RDs than RCTs. A second purpose of this paper is to investigate the external validity of RD by exploring how the size of the bias estimates varies across the 15 studies, for they differ in their settings, interventions, analyses, and implementation details. Both Bayesian and frequentist meta‐analysis methods show that the RD bias is below 0.01 standard deviations on average, indicating RD’s high internal validity. When the study‐specific estimates are shrunken to capitalize on the information the other studies provide, all the RD causal estimates fall within 0.07 standard deviations of their RCT counterparts, now indicating high external validity. With unshrunken estimates, the mean RD bias is still essentially zero, but the distribution of RD bias estimates is less tight, especially with smaller samples and when parametric RD analyses are used.
Monday assorted links
Do earthquakes make men more risk tolerant?
We investigate whether individuals’ risk preferences change after experiencing a natural disaster, specifically, the 2011 Great East Japan Earthquake. Exploiting the panels of nationally representative surveys on risk preferences, we find that men who experienced greater intensity of the earthquake became more risk tolerant a year after the Earthquake. Interestingly, the effects on men’s risk preferences are persistent even five years after the Earthquake at almost the same magnitude as those shortly after the Earthquake. Furthermore, these men gamble more, which is consistent with the direction of changes in risk preferences. We find no such pattern for women.
That is from a newly published paper by Chie Hanaoka, Hitoshi Shigeoka, and Yasutora Watanabe. What else will have this effect?
Those old service sector jobs (Ansichten eines Clowns)
At first they came for the clowns, and I said nothing:
Then McDonald’s terminated its regional Ronald McDonald program at the end of last year, though it’s vague about the reasons for the move…
One former Ronald, who believes their number was as high as 300 nationally, said he earned $64,000 in 2016, plus a $2,000 expense account, a car, and health and dental insurance, a fortune in clowning.
Now, that sort of income and security may be disappearing.
“Young people have not been excited by clowns,” says Richard “Junior” Snowberg, a World Clown Association founder and a retired professor [sic]. “They’re more excited by entertainment on screens.”
…The World Clown Association has 2,400 members, about half its peak membership in the 1990s.
I believe roboclowns are not to blame, nor is it trade with China:
“I’ve been told that ‘you can’t come to the hospital. You’ll scare people.’ That was really heartbreaking,” says veteran Tricia “Pricilla Mooseburger” Manuel, 56, of Maple Lake, Minn. “It’s diminished my income. The damage is done in so many respects. There’s a whole generation that, when they think of a clown, they think of something scary.”
Though, Manuel adds, “people still love us in nursing homes.”
That is from Karen Heller at The Washington Post, via Michael Rosenwald and Mark Thorson.
Sunday assorted links
1. “Japanese Are Polishing Foil Balls To Perfection, And The Result Is Too Satisfying.”
2. Justin Wolfers is correct about the tax law and buybacks (NYT).
3. Bach was more religious than you might think (NYT).
4. The most expensive weather disaster of 2018? How many of you have heard about it?
5. The Chinese shift in attitudes toward female fertility.
6. A new California initiative to give better incentives for “buying down” in real estate, to induce people to move more from very expensive homes.
Owl markets in everything
A U.K. photographer said a newlywed couple has no regrets about choosing an owl to be their ring bearer, even though it flew at a member of the wedding party during their ceremony.
Mark Wood and Jeni Arrowsmith wed at Peckforton Castle in Cheshire, England, on March 17.
Unbeknownst to their guests, the couple hired an owl named Bobby to bring the rings down the aisle.
Here is the CBC story, and for the pointer I thank Michelle Dawson.
The economics of Proposition 13
In 1978 California passed Proposition 13, which lowered property tax rates and restricted future property tax increases. We find that the introduction of Proposition 13 leads to a 15 percent increase in house prices and a 3.3 percent decrease in the moving rates. The elimination of Proposition 13, however, leads to modest changes in house prices and mobility but sizable welfare gains.
Here is the paper by Ayse İmrohoroğlu, Kyle Matoba and Şelale Tüzel. Here are ungated copies.
Blockchain vs. European privacy law (GDPR)
Under the European Union’s General Data Protection Regulation, companies will be required to completely erase the personal data of any citizen who requests that they do so. For businesses that use blockchain, specifically applications with publicly available data trails such as Bitcoin and Ethereum, truly purging that information could be impossible. “Some blockchains, as currently designed, are incompatible with the GDPR,” says Michèle Finck, a lecturer in EU law at the University of Oxford. EU regulators, she says, will need to decide whether the technology must be barred from the region or reconfigure the new rules to permit an uneasy coexistence.
Here is more from Olga Kharif at Bloomberg.