Category: Data Source

Are you a harbinger customer?

If so, stop reading MR!:

Previous research has shown that there exist “harbinger customers” who systematically purchase new products that fail (and are discontinued by retailers). This article extends this result in two ways. First, the findings document the existence of “harbinger zip codes.” If households in these zip codes adopt a new product, this is a signal that the new product will fail. Second, a series of comparisons reveal that households in harbinger zip codes make other decisions that differ from other households. The first comparison identifies harbinger zip codes using purchases from one retailer and then evaluates purchases at a different retailer. Households in harbinger zip codes purchase products from the second retailer that other households are less likely to purchase. The analysis next compares donations to congressional election candidates; households in harbinger zip codes donate to different candidates than households in neighboring zip codes, and they donate to candidates who are less likely to win. House prices in harbinger zip codes also increase at slower rates than in neighboring zip codes. Investigation of households that change zip codes indicates that the harbinger zip code effect is more due to where customers choose to live, rather than households influencing their neighbors’ tendencies.

Here is more from Duncan I. Simester, Catherine E. Tucker, and Claire Yang.  Via the excellent Kevin Lewis.

Has Australia Really Had a 28-Year Expansion? (Yes!)

It’s often said that Australia hasn’t had a recession in nearly 30 years. Paulina Restrepo-Echavarria and Brian Reinbold of the Federal Reserve Bank of St. Louis take a closer look. If a recession is defined as two quarters of negative growth in GDP then the claim is true but if you define a recession as two quarters of negative growth in GDP per capita then there have been three such recessions since 1991: circa 2000-2001, 2005-2006 and 2018-2019.

Line Chart Showing Australia Real GDP Per Capita Growth Rate from 1960 - 2015

Most countries, however, have had more recessions when measured in GDP per capita than in GDP and Australia still looks comparatively good on this measure. Moreover, the official definition of a US recession is not two quarters of negative growth in real GDP it’s the more holistic

A significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.

Did Australia have three recession since 1991 by this measure? It’s difficult to say but I would look more to unemployment rates. The following graph shows Australian real GDP growth rates in purple measured quarterly, real GDP per capita in green measured annually and the unemployment rate in blue. (The data is not identical to Restrepo-Echavarria and Reinbold (RER) as I use FRED data and the FRED economists do not!). As per RER the purple line is generally above the green so you are more likely to see recessions in GDP per capita than in GDP. Take a look at the unemployment rate, however. The 2005-2006 Australian “recession” is completely absent in unemployment so I would rule that out. I also do not see any recession as measured by unemployment in 2018-2019, perhaps it is coming but I would rule it out as of today. The unemployment measure clearly identifies recessions circa 2001-2002 which agrees with RER and also in 2008-2009 where RER do not identify a recession!. Thus, the RER identification of recessions doesn’t work very well as it has both false positives and false negatives.

On the larger issue of Australian economic performance, at worst, I would identify two mild recessions since 1991, circa 2001-2002 and 2008-2009. Now look again at the graph. The shading is US recessions! The Australian and US economies are united enough and subject to similar enough shocks that US recession dating clearly picks out Australian recessions as measured by increases in unemployment rates.

The bottom line is that however you measure it, Australian performance looks very good. Moreover RER are correct that one of the reasons for strong Australian economic performance is higher population growth rates. It’s not that higher population growth rates are masking poorer performance in real GDP per capita, however, it’s more in my view that higher population growth rates are contributing to strong performance as measured by both real GDP and real GDP per capita.


3G Internet and Confidence in Government

Evidence for the Gurri thesis:

How does the internet affect government approval? Using surveys of 840,537 individuals from 2,232 subnational regions in 116 countries in 2008-2017 from the Gallup World Poll and the global expansion of 3G networks, we show that an increase in internet access reduces government approval and increases the perception of corruption in government. This effect is present only when the internet is not censored and is stronger when traditional media is censored. Actual incidents of corruption translate into higher corruption perception only in places covered by 3G. In Europe, the expansion of mobile internet increased vote shares of anti-establishment populist parties.

That is from a new paper by Sergei Guriev, Nikita Melnikov, and Ekaterina Zhuravskaya, via the excellent Ilya Novak and Kevin Lewis.

Claims about Italy and its immigrants

Nonetheless, 75% of immigrants integrate into the majoritarian culture over the period of a generation. Interestingly, we show by counterfactual analysis that a lower cultural intolerance of Italians towards minorities would lead to slower cultural integration by allowing immigrants a more widespread use of their own language rather than Italian in heterogamous marriages.

That is from a new NBER paper by Alberto Bisin and Giulia Tura.

The white collar job apocalypse did not happen

In a follow-up paper released Friday, another economist, Adam Ozimek, revisited Mr. Blinder’s analysis to see what had happened over the past decade. Some job categories that Mr. Blinder identified as vulnerable [to offshoring], like data-entry workers, have seen a decline in United States employment. But the ranks of others, like actuaries, have continued to grow.

Over all, of the 26 occupations that Mr. Blinder identified as “highly offshorable” and for which Mr. Ozimek had data, 15 have added jobs over the past decade and 11 have cut them. Altogether, those occupations have eliminated fewer than 200,000 jobs over 10 years, hardly the millions that many feared. A second tier of jobs — which Mr. Blinder labeled “offshorable” — has actually added more than 1.5 million jobs.

But Mr. Blinder didn’t miss the mark entirely, said Mr. Ozimek, who is chief economist at Upwork, an online platform for hiring freelancers. The new study found that in the jobs that Mr. Blinder identified as easily offshored, a growing share of workers were now working from home. Mr. Ozimek said he suspected that many more were working in satellite offices or for outside contractors, rather than at a company’s main location. In other words, technology like cloud computing and videoconferencing has enabled these jobs to be done remotely, just not quite as remotely as Mr. Blinder and many others assumed.

Here is more from Ben Casselman (NYT).

Do workers discriminate against female bosses?

Yes, it seems:

I hire 2,700 workers for a transcription job, randomly assigning the gender of their (fictitious) manager and provision of performance feedback. While praise from a manager has no effect, criticism negatively impacts workers’ job satisfaction and perception of the task’s importance. When female managers, rather than male, deliver this feedback, the negative effects double in magnitude. Having a critical female manager does not affect effort provision but it does lower workers’ interest in working for the firm in the future. These findings hold for both female and male workers. I show that results are consistent with gendered expectations of feedback among workers. By contrast, I find no evidence for the role of either attention discrimination or implicit gender bias.

That is from a new paper by Martin Abel.

How strong is the evidence that the EITC boosts labor supply?

New work from Henrik Kleven:

This paper reconsiders the impact of the Earned Income Tax Credit (EITC) on labor supply at the extensive margin. I investigate every EITC reform at the state and federal level since the inception of the policy in 1975. Based on event studies comparing single women with and without children, or comparing single mothers with different numbers of children, I show that the only EITC reform associated with clear employment increases is the expansion enacted in 1993. The employment increases in the mid-late nineties are very large, but they are influenced by the confounding effects of welfare reform and a booming macroeconomy. Based on different approaches that exploit variation in these confounders across household type, space and time, I show that the employment effects align closely with exposure to welfare reform and the business cycle. Single mothers who were unaffected by welfare reform (but eligible for the EITC) did not respond. Overall and contrary to consensus, the case for sizable extensive margin effects of the EITC is fragile. I highlight the presence of informational frictions, widely documented in the literature, as a natural explanation for the absence of extensive margin responses.

Via A. Dube.  The effectiveness of EITC used to be a consensus view, so if this result holds up, it would require some substantial revisions in how we think about both welfare and job incentives.

Why do rates of entrepreneurship vary?

Why do societies vary in their rates of entrepreneurship and organizational founding? Drawing on the largest available longitudinal sample comprising 192 countries over 2001-2018, I examine the evidence in relation to several explanations, including variation in the density of established organizations, national investment in research and development (R&D), technology transfer to new companies, the quality of science, technology, engineering and math (STEM) education, venture capital (VC) availability, and governmental support and policies for entrepreneurship. Contrary to prevailing theories, there is limited empirical support for these explanations. Rather, the evidence shows that the strongest predictors of cross-national variation in entrepreneurial activity were normative, with social norms being the most strongly associated with entrepreneurialism and rates of organizational founding. This study further examines the relationship between norms and societal culture and finds that more gender-egalitarian societies and societies that value and reward performance and endorse status privileges had on average higher rates of organizational founding, net of differences in national income and economic growth. The paper discusses the implications of these findings in relation to research on the social determinants of entrepreneurship and organizational founding.

That is from a new paper by Valentina Assenova.  Let me just repeat one sentence in there, as it is one of the most important sentences in all of economics:

Rather, the evidence shows that the strongest predictors of cross-national variation in entrepreneurial activity were normative, with social norms being the most strongly associated with entrepreneurialism and rates of organizational founding.

Recommended.  Here is Assenova’s other new paper, showing entrepreneurship is correlated with higher innovation.

Via the excellent Kevin Lewis.

How much does advertising matter anyway?

Our results reveal substantially smaller advertising elasticities compared to the results documented in the extant literature, as well as a sizable percentage of statistically insignificant or negative estimates. If we only select products with statistically significant and positive estimates, the mean and median of the advertising effect distribution increase by a factor of about five.

That is from a new paper by Shapiro, Hitch, and Tuchman, via Paul Novosad.

The ho-hum of environmental politics

For better or worse, it is not the source of so much political romance or glamour:

The public influences government policy primarily through elections. Elections affect policy largely by determining which party controls the government. We show that a majority of the public supports policies to protect the environment. But the environment is rarely the most important issue for voters, and thus the environment usually does not have a large impact in elections. Moreover, there are increasingly large divisions between Democrats and Republicans, which incentivizes politicians from both parties to embrace extreme positions. Democratic and Republican elected officials are increasingly polarized on environmental issues, with Democrats staking out much more liberal positions than Republicans in Congress. At the state level, Democratic control of legislatures and governorships leads to more stringent environmental policies. Democratic control of state government seems to have smaller effects, however, on environmental outcomes, such as air pollution emissions.

That is the abstract of a new working paper by Parrish Bergquist and Christopher Warshaw.

Oversight of cost overruns does not always help

In the United States, 42% of public infrastructure projects report delays or cost overruns. To mitigate this problem, regulators scrutinize project operations. We study the effect of oversight on delays and overruns with 262,857 projects spanning 71 federal agencies and 54,739 contractors. We identify our results using a federal bylaw: if the project’s budget is above a cutoff, procurement officers actively oversee the contractor’s operations; otherwise, most operational checks are waived. We find that oversight increases delays by 6.1%–13.8% and overruns by 1.4%–1.6%. We also show that oversight is most obstructive when the contractor has no experience in public projects, is paid with a fixed-fee contract with performance-based incentives, or performs a labor-intensive task. Oversight is least obstructive—or even beneficial—when the contractor is experienced, paid with a time-and-materials contract, or conducts a machine-intensive task.

That is from a new paper by Calvo, Cui, and Serpa, via the excellent Kevin Lewis.

How Harvard makes admissions decisions

Here are some new and very thorough results from Peter Arcidiacono, Josh Kinsler, and the excellent Tyler Ransom:

The lawsuit Students For Fair Admissions v. Harvard University provided an unprecedented look at how an elite school makes admissions decisions. Using publicly released reports, we examine the preferences Harvard gives for recruited athletes, legacies, those on the dean’s interest list, and children of faculty and staff (ALDCs). Among white admits, over 43% are ALDC. Among admits who are African American, Asian American, and Hispanic, the share is less than 16% each. Our model of admissions shows that roughly three quarters of white ALDC admits would have been rejected if they had been treated as white non-ALDCs. Removing preferences for athletes and legacies would significantly alter the racial distribution of admitted students, with the share of white admits falling and all other groups rising or remaining unchanged.

Am I allowed to observe that this seems wrong to me?  And that our “liberal elite” (not my preferred term, but what you see in the discourse and I don’t know which other referent to use) has failed us?

And from Garett Jones:

Controlling for academic traits and much else, being Asian American predicts a substantially lower probability of Harvard admission… And being female predicts a substantially higher probability of admission.

Here is the full paper.  For the pointer I thank various MR readers.

Frequency of conflict initiation worldwide

That is from the new and interesting Only the Dead: The Persistence of War in the Modern Age, by Bear F. Braumoeller, which is largely a critique of Pinker on trends toward peacefulness (Pinker gives only the more optimistic data on Europe).  And from the text:

…there is variation in the rate of conflict and war initiation over time, and it’s pretty substantial.  Leaving aside the two jumps during the World Wars, the median rate of conflict initiation quadruples in the period between 1815 and the end of the Cold War, after which it abruptly drops by more than half.

The “falling rate of conflict” is thus not entirely reassuring.

How about the deadliness of occurring conflicts?:

Analyzing the two most commonly used measures of the deadliness of war, I find no significant change in war’s lethality.  If anything, the data indicate a very modest increase in lethality, but that increase could very easily be due to chance…Worse still, the data are consistent with a process by which only random chance prevents small wars from escalating into very, very big ones.

Overall, the arguments in this book are strong, and the discussion of data issues is subtle throughout.  You can buy the book here, its arguments seem fundamentally correct to me.

Consumers seem to like search engine advertising

We analyze a large-scale field experiment conducted on a US search engine in which 3.3 million users were randomized into seeing more, or less advertising. Our data rejects that users are, overall, averse to search advertising targeted to them. At the margin, users prefer the search engine with higher level of advertising. The usage of the search engine (in terms of number of searches, and number of search sessions) is higher among users who see higher levels of advertising, relative to the control group. This difference in usage persists even after the experimental treatment ends. The increase in usage is higher for users on the margin who, in the past, typed a competing search engine’s name in the search query and navigated away from our focal search engine. On the supply side, higher level of advertising increases traffic to newer websites. Consumer response to search advertising is also more positive when more businesses located in the consumer’s state create new websites. Quantitatively, the experimental treatment of a higher level of advertising increases ad clicks which leads to between 4.3% to 14.6% increase in search engine revenue.

Overall, patterns in our data are consistent with an equilibrium in which advertising conveys relevant “local” information, which is unknown to the search engine, and therefore missed by the organic listings algorithm. Hence, search advertising makes consumers better off on average. On the margin, the search engine does not face a trade-off between advertising revenue and search engine usage.

That is from Navdeep S. Sahni and Charles Zhang, via the excellent Kevin Lewis.

Maybe pet health care is not seeing as much cost inflation as we thought

Nationwide’s pet health insurance division has partnered with Purdue University researchers to track trends in pet insurance payouts. The researchers track a “basket” of the most commonly-utilized procedures to see how the typical veterinary visit has changed in price over time. According to their research, these ordinary expenses declined by 6 percent from January 2009 to December 2017 after adjusting for inflation.

This decrease is corroborated by less reliable sources, such as the American Pet Products Association (APPA) annual consumer spending surveys. For virtually every year tracked (accessible via web archive), cat and dog owners reported spending less money on average routine and surgical visits. The data is jumpier than the Nationwide and Purdue rigorous analysis of 30 million insurance claims but confirms an interesting – and counterintuitive – trend.  In a system where consumers and patients’ “representatives” have enough skin in the game, healthcare prices behave like they would in most other markets.

That is from Ross Marchand, “Why cats pay a lower price for CAT scans.”  Here is earlier work by Einav, Finkelstein, and Gupta about pet health care being about as inefficient as human health care.  I don’t consider this a settled issue, but it is interesting to hear a revision on what had been the most common take.