Category: Data Source

Censorship of U.S. Movies in China

We introduce a structural econometric model to estimate the extent to which the Chinese government bans U.S. movies. According to our estimates, if a movie has characteristics similar to the median movie in our sample, then the probability is approximately 0.91 that the Chinese government will ban it. During our sample period, 1994-2019, U.S. movies comprised about 28 percent of the Chinese market and sales were about $22.6 billion. However, according to our estimates, if the Chinese government had not banned any U.S. movies, then the latter numbers would have risen to 68 percent and $45.1 billion.

As for what gets banned:

…, two factors that have very high statistical significance are: (i) whether the movie contains occult content, and (ii) whether the movie
receives an R rating from the Motion Picture Association of America (MPAA). The factors also have very high substantive significance. For instance, suppose two movies, A and B, are identical except that movie A contains occult content, while B does not. Suppose movie B’s probability of being banned is 50%. Then, according to our results, the occult content in movie A causes its probability of being banned to rise to 67%. A similar thought experiment implies that, if a movie has an R rating, then this raises its probability of being banned from 50% to 70%.

Three other factors seem to be important but come just short of reaching statistical significance. These are whether the movie contains themes related to (i) anti-communism, (ii) individualism, or (iii) Tibet. A fourth factor is similar. This is whether the actor Richard Gere
appears in the movie.

That is a new paper by XUHAO PAN, Tim Groseclose, and yours truly, forthcoming in the Journal of Cultural Economics.

Vincent Geloso says “Ouch!” to PSZ

The Piketty-Saez-Zucman response to Auten and Splinter

A number of you have asked me what I think of their response.  The first thing I noticed is that Auten and Splinter make several major criticisms of PSZ, and yet PSZ respond to only one of them.  On the others they are mysteriously silent.

The second thing I noticed is that PSZ have been trying to deploy the slur of “inequality deniers” against Auten and Splinter.  I take that as a bad epistemic sign.

I was in the midst of writing a longer post, but then I received the following from Splinter, and I cannot come close to his efforts or authority:

Here is a short response to yesterday’s comments by Piketty, Saez, and Zucman (PSZ) on Auten and Splinter (forthcoming in JPE). These are variations on prior comments that Jerry and I addressed in 2019 and 2020. 

First, PSZ say audit data suggest adding underreported income implies little change in top 1% shares. We agree. But their approach increases recent top 1% shares about 1.5 percentage points, with about 50% of underreported business income going to the top 1% by reported income. However, Johns and Slemrod (2012) found only 5% of underreporting went to the top 1% by reported income. This discrepancy is because PSZ allocate underreported income proportional to reported positive income, which ignores that a substantial share of business underreporting (about 40%) goes to individuals with reported negative total income, where misreporting rates are the highest (Table B3 here). The concentration of underreporting at the bottom of the reported distribution causes substantial upward re-ranking when adding underreported income, but that’s mostly ignored in the PSZ approach. The PSZ approach also implies that someone who decreases their underreporting rate by increasing their reported income is allocated more underreporting. That’s backwards. 

In contrast, our approach fits prior estimates from audit data, makes use of many years of audit data, and improves upon prior approaches. We find that underreported income slightly lowers top 1% pre-tax income shares and slightly increases after-tax income shares (Figure B6 here), which is consistent with the audit data. For example, 16% of underreporting is in our top 1% ranked by true income, far less than PSZ’s near 50%-allocation and a bit under the 27% in Johns and Slemrod because we improve upon prior approaches that misallocate undetected underreporting (discussion here). Contrary to the assertions and approach of PSZ, our Figure B5 (bottom panel, here) shows­ that re-ranking between reported and true (reported plus underreported) income matters substantially. PSZ appear confused about the difference between ranking by reported versus true income. Our underreporting allocations (as are theirs) must be based on reported income because that is all one observes with the primary tax data we both use. But, unlike their method, our allocations are done such that we match the re-ranking implied by audit data. Therefore, we match both the distributions by reported and true income after re-ranking (top two panels of Figure B5, here). 

Second, income missing from individual tax returns has shifted from the top to outside the top. The shift from the top was from movements out of closely-held C corporations, whose income is missing from individual tax returns, to passthrough businesses, whose income is on individual tax returns. This created growth in the top share of taxed business income. The growth in PSZ’s top share of untaxed business income, however, is due to their skewed allocation of underreported income that re-allocates underreported income to the top of the distribution. Outside the top, the growth of missing income is from increasing tax-exempt employee compensation, especially from health insurance (see Figure B16 here).

Third, PSZ suggest that top wealth and capital income shares should run parallel over the long run. This is a problematic assumption. Economic changes can push down capital income shares relative to wealth shares. For example, interest rates fell dramatically between 1989 and 2019—the federal funds effective rate fell from 9 to 2 percent. This tends to decrease the ratio of interest-income to bond-wealth and therefore falling interest rates likely increased the gap between top income and wealth shares. Also, much of top wealth patterns are driven by passthrough business, but this is fully or two-thirds excluded from PSZ’s definition of “capital” income here. When fully including passthrough business, the Auten–Splinter top 1% non-housing “capital” income share increased by 5 percentage points between 1989 to 2019, about two-thirds the Federal Reserve’s estimated increase in top 1% wealth shares. Therefore, the Auten-Splinter estimates are broadly consistent with increasing top wealth shares.

 The Auten–Splinter approach is fundamentally a data-driven approach (Table B2 here). Based on Saez and Zucman’s (2020) suggestions and conversations, our more recent work adds new uses of data to account for high-income non-filers, flexible spending accounts, and depreciation issues from expensing. Where we rely on assumptions, alternative ones suggest top 1% shares change little, see Table 5. Our headline finding of relatively flat long-run top 1% after-tax income shares is robust.

Auten and Splinter had presented versions of those points previously, as they note.  Yet PSZ present them as naive fools who somehow forgot to think about these issues at all, and PSZ do not, in their reply, consider these more detailed presentations of the point and defenses of the  Auten-Splinter estimates.  So I don’t think of the PSZ response as especially strong.

Here are relevant Auten and Splinter points from back in 2020.  Phil Magness offers commentary.

Do people trust humans more than Chat GPT?

We explore whether people trust the accuracy of statements produced by large language models (LLMs) versus those written by humans. While LLMs have showcased impressive capabilities in generating text, concerns have been raised regarding the potential for misinformation, bias, or false responses. In this experiment, participants rate the accuracy of statements under different information conditions. Participants who are not explicitly informed of authorship tend to trust statements they believe are human-written more than those attributed to ChatGPT. However, when informed about authorship, participants show equal skepticism towards both human and AI writers. There is an increase in the rate of costly fact-checking by participants who are explicitly informed. These outcomes suggest that trust in AI-generated content is context-dependent.

That is from a new paper by Joy Buchanan and William Hickman.

Earth fact of the day

This week, the International Institute for Strategic Studies in London published the latest edition of its authoritative annual Armed Conflict Survey, and it’s not predicting much peace for the holidays. It paints a grim picture of rising violence in in many regions, of wars chronically resistant to broking of peace. The survey — which addresses regional conflicts rather than the superpower confrontation between China, Russia, the US and its allies — documents 183 conflicts for 2023, the highest number in three decades…

The intensity of conflict has risen year on year, with fatalities increasing by 14% and violent events by 28% in the latest survey. The authors describe a world “dominated by increasingly intractable conflicts and armed violence amid a proliferation of actors, complex and overlapping motives, global influences and accelerating climate change.”

Here is more from Max Hastings at Bloomberg.

Differential fertility makes society more conservative on family values

“Family values” conservatives in the United States have more children and more siblings than their compatriots. These patterns reflect the tendency of the more religious and less educated to have larger families and more conservative views on the family. Among Protestants, denominational differences play a role, with fundamentalist groups exhibiting larger families, less education, and greater conservatism. The causal pathways are unclear, but the patterns reshape society: Traditional-family conservatism is more prevalent than it would have been if each person had the same population share as his or her parents. This demographic phenomenon raises opposition to same-sex marriage and abortion by 3 to 4 percentage points. It accounts for 7.9 million of the nation’s 54.8 million opponents to same-sex marriage.

That is a new paper by Tom S. Vogl and Jeremy Freese, from brandonrox.

European inflation was more painful for the elderly

That is the topic of my latest Bloomberg column, here is one bit:

As recent research indicates, the recent inflation has been very costly. The 2021-2022 inflation cost more than 3% of national income in France, Germany and Spain, and about 8% of national income in Italy, higher costs than what a typical recession would bring.

It is striking how much those costs fall on the elderly, which is one reason that lowering inflation rates has been such a priority. The elderly usually have the most accumulated savings, and less time to make up for inflationary losses by subsequent compounding. Older people are also more likely to own homes, so face higher home heating bills when energy prices rise. Overall, in the last several years, a low-income retired household in Italy might have taken income cuts of up to 20%, while a middle-aged household in the euro area might have seen a typical income cut of 5%.

…Not everyone lost from the inflation. Young households in Spain, for instance, gained more than 5% in income. The simplest way a household might gain from inflation is that its debt liabilities decline in real, inflation-adjusted value. On average, the young are more likely to be in debt than the elderly, and own fewer assets. Inflation also tends to lower the value of tenured jobs, such as in academia, and younger people are less likely to hold such posts. The young also tend to have more time in their lives to adjust to negative economic shocks, by for instance geographic or career migration.

Overall, an estimated 30% of the households in the euro area gained from the inflationary shock. Almost half of 25- to 44-year-olds benefited.

On net, the inflation remains a clear negative.  But how many other eurozone policies manage to favor the young?

Here is the underlying research by Filippo Pallotti, Gonzalo Paz-Pardo, Jiri Slacalek, Oreste Tristani, and Giovanni L. Violante.

Trading on terror

Recent scholarship shows that informed traders increasingly disguise trades in economically linked securities such as exchange-traded funds (ETFs). Linking that work to longstanding literature on financial markets’ reactions to military conflict, we document a significant spike in short selling in the principal Israeli-company ETF days before the October 7 Hamas attack. The short selling that day far exceeded the short selling that occurred during numerous other periods of crisis, including the recession following the financial crisis, the 2014 Israel-Gaza war, and the COVID-19 pandemic. Similarly, we identify increases in short selling before the attack in dozens of Israeli companies traded in Tel Aviv. For one Israeli company alone, 4.43 million new shares sold short over the September 14 to October 5 period yielded profits (or avoided losses) of 3.2 billion NIS on that additional short selling. Although we see no aggregate increase in shorting of Israeli companies on U.S. exchanges, we do identify a sharp and unusual increase, just before the attacks, in trading in risky short-dated options on these companies expiring just after the attacks. We identify similar patterns in the Israeli ETF at times when it was reported that Hamas was planning to execute a similar attack as in October. Our findings suggest that traders informed about the coming attacks profited from these tragic events, and consistent with prior literature we show that trading of this kind occurs in gaps in U.S. and international enforcement of legal prohibitions on informed trading. We contribute to the growing literature on trading related to geopolitical events and offer suggestions for policymakers concerned about profitable trading on the basis of information about coming military conflict.

That is from a new paper by Robert J. Jackson, Jr. and Joshua Mitts.  Via the excellent Jordan Schneider.

Debunked?: Possibly the study is quite wrong.

Who is responsible for grade inflation at Yale? (economists are meanies?)

If you click on the tweet you can see the full lists, as it gets much worse than what makes it on the screen here.  Via T. Greer.

South American economic growth

While there are varying sources, I did check a few of the numbers and they were confirmed. At first they seemed a little high to me.

Addendum: Note there is some kind of data problem with the 1980 numbers, but the latter-day numbers seem fine.

Perhaps intergenerational mobility has not declined in the United States after all

From the latest American Economic Review:

A large body of evidence finds that relative mobility in the US has declined over the past 150 years. However, long-run mobility estimates are usually based on White samples and therefore do not account for the limited opportunities available for nonwhite families. Moreover, historical data measure the father’s status with error, which biases estimates toward greater mobility. Using linked census data from 1850 to 1940, I show that accounting for race and measurement error can double estimates of intergenerational persistence. Updated estimates imply that there is greater equality of opportunity today than in the past, mostly because opportunity was never that equal. (JEL J15, J62, N31, N32)

That is from Zachary Ward of Baylor University.  If that is true, and it may be, how many popular economics books from the last twenty years need to be tossed out?  How many “intergenerational mobility is declining” newspaper columns and magazine articles?  Ouch.  No single article settles a question, but for now this seems to be the best, most up to date word on the matter.

Here are earlier, less gated copies of the research.

Reassessing China’s Rural Reforms: The View from Outer Space

We study one of the central reforms in China’s economic miracle, the Household Responsibility System (HRS), which decollectivized agriculture starting in 1978. The HRS is commonly seen as having significantly boosted agricultural productivity—but this conclusion rests on unreliable official data. We use historical satellite imagery to generate new measurements of grain yield, independent of official Chinese statistics. Using two separate empirical designs that exploit the staggered rollout of the HRS across provinces and counties, we find no causal evidence that areas that adopted the HRS sooner experienced faster grain yield growth. These results challenge our conventional understanding of decollectivization, land reform, and the origins of the Chinese miracle.

That is a new paper by Joel Ferguson and Oliver Kim, with Kim being on the job market from Berkeley this year.  Here is Kim’s thread on Twitter.  Intriguing results, which have won praise from Pseudoerasmus…

Carrying opioids in legal imports?

The U.S. opioid crisis is now driven by fentanyl, a powerful synthetic opioid that currently accounts for 90% of all opioid deaths. Fentanyl is smuggled from abroad, with little evidence on how this happens. We show that a substantial amount of fentanyl smuggling occurs via legal trade flows, with a positive relationship between state-level imports and drug overdoses that accounts for 15,000-20,000 deaths per year. This relationship is not explained by geographic differences in “deaths of despair,” general demand for opioids, or job losses from import competition. Our results suggest that fentanyl smuggling via imports is pervasive and a key determinant of opioid problems

That is from a new NBER working paper by Timothy J. Moore, William W. Olney, and Benjamin Hansen.  One core lesson seems to be that interdiction is largely a futile endeavor.

Does studying economics make you more selfish?

Maybe not:

It is widely held that studying economics makes you more selfish and politically conservative. We use a difference-in-differences strategy to disentangle the causal impact of economics education from selection effects. We estimate the effect of four different intermediate microeconomics courses on students’ experimentally elicited social preferences and beliefs about others, and policy opinions. We find no discernible effect of studying economics (whatever the course content) on self-interest or beliefs about others’ self-interest. Results on policy preferences also point to little effect, except that economics may make students somewhat less opposed to highly restrictive immigration policies.

That is from a newly published paper by Daniele Girardi, Sai Madhurika Mamunuru, Simon D. Halliday, and Samuel Bowles.  This is a good example of a myth that got started with relatively little basis in fact.  At the very least it now has to be filed under “unconfirmed, likely false.”  Via Stefan Schubert.