Category: Data Source

The extreme illusion of understanding

Though speakers and listeners monitor communication success, they systematically overestimate it. We report an extreme illusion of understanding that exists even without shared language. Native Mandarin Chinese speakers overestimated how well native English-speaking Americans understood what they said in Chinese, even when they were informed that the listeners knew no Chinese. These listeners also believed they understood the intentions of the Chinese speakers much more than they actually did. This extreme illusion impacts theories of speech monitoring and may be consequential in real-life, where miscommunication is costly.

That is from a new paper by Becky Ka Ling Yau,  Via the excellent Kevin Lewis.

Do founders outperform at venture capital?

In a nutshell, yes:

In this paper we explore whether or not the experience as a founder of a venture capital-backed startup influences the performance of founders who become venture capitalists (VCs). We find that nearly 7% of VCs were previously founders of a venture-backed startup. Having a successful exit and being male and white increase the probability that a founder transitions into a venture capital career. Successful founder-VCs have investment success rates that are 6.5 percentage points higher than professional VCs while unsuccessful founder-VCs have investment success rates that are 4 percentage points lower than professional VCs. While successful founder-VCs do get higher quality deal flow than professional or unsuccessful founder-VCs, observably higher deal quality does not explain the entire difference in performance. Using an instrumental variables approach to separate unobservable deal quality from value-add, we find that the outperformance of successful founder-VCs is consistent with them adding more value post-investment.

That is from a new NBER working paper by Paul A. Gompers and Vladimir Mukharlyamov.

U.S.A. fact of the day

The Census data shows that of the nation’s 10 largest cities in 1950, only New York City and Los Angeles went on to have larger populations in 2020. The other eight — Chicago, Philadelphia, Detroit, Baltimore, Cleveland, St Louis, Washington, D.C., and Boston — all saw their populations fall in the following seven decades.

Here is the full article, about newly released Census data from 1950.  Via Mike Doherty.

Will Studying Economics Make You Rich?

A bit!:

We investigate the wage return to studying economics by leveraging a policy that prevented students with low introductory grades from declaring a major. Students who barely met the grade point average threshold to major in economics earned $22,000 (46 percent) higher annual early-career wages than they would have with their second-choice majors. Access to the economics major shifts students’ preferences toward business/finance careers, and about half of the wage return is explained by economics majors working in higher-paying industries. The causal return to majoring in economics is very similar to observational earnings differences in nationally representative data.

That is from a newly published paper by Zachary Bleemer and Aashish Mehta.

The complexities of feminization

One of them concerns happiness:

Using data across countries and over time we show that women are unhappier than men in unhappiness and negative affect equations, irrespective of the measure used – anxiety, depression, fearfulness, sadness, loneliness, anger – and they have more days with bad mental health and more restless sleep. Women are also less satisfied with many aspects of their lives such as democracy, the economy, the state of education and health services. They are also less happy in the moment in terms of peace and calm, cheerfulness, feeling active, vigorous, fresh and rested. However, prior evidence on gender differences in global wellbeing metrics – happiness and life satisfaction – is less clear cut. Differences vary over time, location, and with model specification and the inclusion of controls especially marital status. We also show that there are significant variations by month in happiness data regarding whether males are happier than females but find little variation by month in unhappiness data. It matters which months are sampled when measuring positive affect but not with negative affect. These monthly data reveal that women’s happiness was more adversely affected by the COVID shock than men’s, but also that women’s happiness rebounded more quickly suggesting resilience. As a result, we now find strong evidence that males have higher levels of both happiness and life satisfaction in recent years even before the onset of pandemic. As in the past they continue to have lower levels of unhappiness. A detailed analysis of several data files, with various metrics, for the UK confirms that men now are happier than women.

Here is the full NBER paper by David G. Blanchflower and Alex Bryson.

The economics of Twitter moderation

Social media platforms ban users and remove posts to moderate their content. This “speech policing” remains controversial because little is known about its consequences and the costs and benefits for different individuals. I conduct two field experiments on Twitter to examine the effect of moderating hate speech on user behavior and welfare. Randomly reporting posts for violating the rules against hateful conduct increases the likelihood that Twitter removes them. Reporting does not affect the activity on the platform of the posts’ authors or their likelihood of reposting hate, but it does increase the activity of those attacked by the posts. These results are consistent with a model in which content moderation is a quality decision for platforms that increases user engagement and hence advertising revenue. The second experiment shows that changing users’ perceived content removal does not change their willingness to pause using social media, a measure of consumer surplus. My results imply that content moderation does not necessarily moderate users, but it marginally increases advertising revenue. It can be consistent with both profit- and welfare-maximization if out-of-platform externalities are small.

That is from a new paper by Rafael Jiménez Durán, via the excellent Kevin Lewis.

The cultural evolution of love in literary history

Since the late nineteenth century, cultural historians have noted that the importance of love increased during the Medieval and Early Modern European period (a phenomenon that was once referred to as the emergence of ‘courtly love’). However, more recent works have shown a similar increase in Chinese, Arabic, Persian, Indian and Japanese cultures. Why such a convergent evolution in very different cultures? Using qualitative and quantitative approaches, we leverage literary history and build a database of ancient literary fiction for 19 geographical areas and 77 historical periods covering 3,800 years, from the Middle Bronze Age to the Early Modern period. We first confirm that romantic elements have increased in Eurasian literary fiction over the past millennium, and that similar increases also occurred earlier, in Ancient Greece, Rome and Classical India. We then explore the ecological determinants of this increase. Consistent with hypotheses from cultural history and behavioural ecology, we show that a higher level of economic development is strongly associated with a greater incidence of love in narrative fiction (our proxy for the importance of love in a culture). To further test the causal role of economic development, we used a difference-in-difference method that exploits exogenous regional variations in economic development resulting from the adoption of the heavy plough in medieval Europe. Finally, we used probabilistic generative models to reconstruct the latent evolution of love and to assess the respective role of cultural diffusion and economic development.

Speculative, that is a new paper by Nicholas Baumard, Elise Huillery, Alexandre Hyafil, and Lou Safra.

Brazil fact of the day

In the 1980s manufacturing peaked at 34% of Brazil’s gdp. In 2020 it was just 11%…

Between 1980 and 2017, manufacturing value added in Brazil in real terms grew by only 24%, compared with 69% in neighbouring Argentina and 204% worldwide.

Brazil’s science-based industries have also lost their share of gdpfaster than expected. In the 1980s Brazil produced 55% of the pharmaceutical ingredients it used. By 2020 this had dropped to 5%.

Here is the full article from The Economist.  The problem of course is that Brazil is deindustrializing before its industrialization had the chance to build a stable middle class.

How is U.S. urban public safety changing?

This paper argues that changes in human activity during the COVID-19 pandemic led to an unusual divergence between crime rates and victimization risk in US cities. Most violent crimes declined during the pandemic. But analysis using foot traffic data shows that the risk of street crime victimization was elevated throughout 2020; people in public spaces were 15-30 percent more likely to be robbed or assaulted. This increase is unlikely to be explained by changes in crime reporting or selection into outdoor activities by potential victims. Traditional crime rates may present a misleading view of recent changes in public safety.

Here is the paper by Maxim Massenkopf and Aaron Chalfin, via the excellent Samir Varma.

An index for state capacity

This paper contributes to the literature on state capacity by developing a method that yields an index of state capacity with far more comprehensive data coverage across time and countries than has been possible previously. Unlike narrower measures of fiscal capacity or legal capacity, the index is more comprehensive, using data from the Varieties of Democracy dataset on fiscal capacity, a state’s control over its territory, the rule of law, and the provision of public goods used to support markets. Like the previous literature, it demonstrates that the historical prevalence of warfare predicts state capacity. Several exercises are performed to demonstrate the validity of the index in measuring state capacity.

That is from a newly published paper by Colin O’Reilly and Ryan H. Murphy, via the excellent Kevin Lewis.

Against alcohol, #6437

This paper evaluates the impact of a sudden and unexpected nation-wide alcohol sales ban in South Africa. We find that this policy causally reduced injury-induced mortality in the country by at least 14% during the five weeks of the ban. We argue that this estimate constitutes a lower bound on the true impact of alcohol on injury-induced mortality. We also document a sharp drop in violent crimes, indicating a tight link between alcohol and aggressive behavior in society. Our results underscore the severe harm that alcohol can cause and point towards a role for policy measures that target the heaviest drinkers in society.

That is new research from Kai Barron, Charles D.H. Parry, Debbie Bradshaw, Rob Dorrington, Pam Groenewald, Ria Laubscher, and Richard Matzopoulos.  To be clear, the “policy measure” I favor is absolute individual boycott, not some kind of soporific Pigouvian tax scheme that won’t attract any real extra attention.

Redistribution sentences to ponder

After accounting for indirect taxes and in-kind transfers, the US redistributes a greater share of national income to low-income groups than any European country.

Here is the full paper by Thomas Blanchet, Lucas Chancel, and Amory Gethin.  Please also note that “context is that which is scarce,” and the authors probably attach a different interpretation to this sentence than I do.

Via Ilya Novak.

Labor supply still really matters

We also document a sharp decline in desired work hours during the pandemic that persists through the end of 2021 and is roughly double the drop in the labor force participation rate. Ignoring the decline in desired hours overstates the degree of underutilization by 2.5 percentage points (12.5%). Our findings suggest that, as of 2021Q4, the labor market is tighter than suggested by the unemployment rate and the adverse labor supply effect of the pandemic is more pronounced than implied by the labor force participation rate.

That is from a new NBER working paper by R. Jason Faberman, Andreas I. Mueller, and  Ayşegül Şahin.

Progresa after 20 Years

Remember the Mexican cash transfer program, sometimes used to support education?  Some new results are in, and the program is looking pretty good:

In 1997, the Mexican government designed the conditional cash transfer program Progresa, which became the
worldwide model of a new approach to social programs, simultaneously targeting human capital accumulation
and poverty reduction. A large literature has documented the short and medium-term impacts of the Mexican
program and its successors in other countries. Using Progresa’s experimental evaluation design originally rolled out in 1997-2000, and a tracking survey conducted 20 years later, this paper studies the differential long-termimpacts of exposure to Progresa. We focus on two cohorts of children: i) those that during the period of differential exposure were in-utero or in the first years of life, and ii) those who during the period of differential exposure were transitioning from primary to secondary school. Results for the early childhood cohort, 18–20-year-old at endline, shows that differential exposure to Progresa during the early years led to positive impacts on educational attainment and labor income expectations. This constitutes unique long-term evidence on the returns of an at-scale intervention on investments in human capital during the first 1000 days of life. Results for the school cohort – in their early 30s at endline – show that the short-term impacts of differential exposure to Progresa on schooling were sustained in the long-run and manifested themselves in larger labor incomes, more geographical mobility including through international migration, and later family formation.

Here is the full paper by M. Caridad Araujo and Karen Macours from Poverty Action Lab.