Category: Data Source

From a scientist, coronavirus pictures to ponder

Figure legend
– Plotted in log scale!
– US cases based on deaths: estimated number of real cases using SK‘s current death rate of 0.6%
– US prediction 1a: predicted lower lower bound trajectory based on SK and China (assumes containment and large amount of testing )
– US 2a: upper bound, same assumptions as 1a
– US prediction 1b: no serious containment, trajectory similar to flu, lower bound
– 2b: Higher bound for flu-like trajectory

As I read this picture, it seems to suggest that the returns to properly done containment can be high.  What do you all think?

Maybe they are the ones who know?

The top 1% are the only affluent group consistently more inclined than the general population to attribute variation in drive and IQ to both internal causes, particularly to innate causes (the top 1% also differ from the other affluent, at p < .01).  This said, the affluent are not more dismissive than others of environmental causal explanations.  Interestingly, across all income groups, “environmental” explanations for drive and IQ are more popular than the two internal explanations.

That is from a new paper (and here) by Elizabeth Suhay, Marko Klašnja, and Gonzalo Rivero.

Social security and trends in inequality

Recent influential work finds large increases in inequality in the U.S., based on measures of wealth concentration that notably exclude the value of social insurance programs. This paper revisits this conclusion by incorporating Social Security retirement benefits into measures of wealth inequality. Wealth inequality has not increased in the last three decades when Social Security is accounted for. When discounted at the risk-free rate, real Social Security wealth increased substantially from $5.6 trillion in 1989 to just over $42.0 trillion in 2016. When we adjust for systematic risk coming from the covariance of Social Security returns with the market portfolio, this increase remains sizable, growing from over $4.6 trillion in 1989 to $34.0 trillion in 2016. Consequently, by 2016, Social Security wealth represented 58% of the wealth of the bottom 90% of the wealth distribution. Redistribution through programs like Social Security increases the progressivity of the economy, and it is important that our estimates of wealth concentration reflect this.

That is from a new paper by Sylvain Catherine, Max Miller, and Natasha Sarin, I look forward to reading it soon.  It is at least possible that the Saez-Zucman results are coming under further question.

Just to repeat part of the abstract, I find this sentence striking: “When discounted at the risk-free rate, real Social Security wealth increased substantially from $5.6 trillion in 1989 to just over $42.0 trillion in 2016.”  That’s a lot.

And this one: “Consequently, by 2016, Social Security wealth represented 58% of the wealth of the bottom 90% of the wealth distribution.”  Wow.

What makes for a good CEO?

We develop a new method to measure CEO behavior in large samples via a survey that collects high-frequency, high-dimensional diary data and a machine learning algorithm that estimates behavioral types. Applying this method to 1,114 CEOs in six countries reveals two types: “leaders,” who do multifunction, high-level meetings, and “managers,” who do individual meetings with core functions. Firms that hire leaders perform better, and it takes three years for a new CEO to make a difference. Structural estimates indicate that productivity differentials are due to mismatches rather than to leaders being better for all firms.

That is from a new paper by 

Free Tool to Run the Double Oral Auction Experiment

The double oral auction was one of the first experiments that Vernon Smith ran. He was expecting to find that the supply and demand model didn’t work. Instead, the results changed his life and led to a Nobel prize:

I am still recovering from the shock of the experimental results. The outcome was unbelievably consistent with competitive price theory. … But the result can’t be believed, I thought. It must be an accident, so I will take another class and do a new experiment with different supply and demand schedules. (Smith 1991)

I’ve run similar experiments in my principles class. The exercise is fun for the students and it’s always amazing to see how quickly the equilibrium is attained even though none of the participants has any idea what the equilibrium price and quantity are. The experiment can be run with paper and pencil or a laptop in a small class but that gets cumbersome for a larger class. Fortunately, there are some free tools.

Here’s Hampton and Johnson describing Kiviq.us.

Kiviq.us provides an online version of the double oral auction that works on all student Internet-enabled devices, including smartphones and iPads, without requiring students or instructors to download any special software. Results can be projected on a screen for debriefing. Instructors can set key parameters. A version with price controls can be setup. The use of the experiment is free for instructors and students. Students do not have to give their email address to play.

The design is the classic market experiment for introducing students to demand and supply. Joseph (1970) makes a strong case for the benefits of the “market experiment” in teaching based on experience with high school and undergraduate students. The original experiment was created by Smith (1962).

….After a trading session, instructors can debrief showing dynamically the history of bids, asks, trades, individual attribution of bids/asks (by clicking the chart), individual total earnings, and the underlying demand and supply curves.

Modern Principles of Economics introduces the supply and demand model and Smith’s classic experiment and thus is an ideal accompaniment.

Age and high-growth entrepreneurship

Many observers, and many investors, believe that young people are especially likely to produce the most successful new firms. Integrating administrative data on firms, workers, and owners, we study start-ups systematically in the United States and find that successful entrepreneurs are middle-aged, not young. The mean age at founding for the 1-in-1,000 fastest growing new ventures is 45.0. The findings are similar when considering high-technology sectors, entrepreneurial hubs, and successful firm exits. Prior experience in the specific industry predicts much greater rates of entrepreneurial success. These findings strongly reject common hypotheses that emphasize youth as a key trait of successful entrepreneurs.

That is from a newly published AER paper by Pierre Azoulay, Benjamin F. Jones, J. Daniel Kim, and Javier Miranda.

Cultural biases in equity analysis

Vesa Pursiainen covers this topic in a new paper.  Most concretely:

My estimates suggest that a Norwegian analyst is 8.4 %-points more likely to assign a buy rating to a Danish firm than an Austrian analyst. Similarly, a Norwegian analyst is 6.7 %-points more likely to assign a buy-recommendation to a British firm than a French analyst.

And here is the abstract:

A more positive cultural trust bias by an equity analyst’s country of origin toward a firm’s headquarter country is associated with significantly more positive stock recommendations, controlling for analyst-month and firm-month fixed effects. The cultural bias effect is stronger for eponymous firms whose names mention their home country. The bias effect varies over time, increasing with negative sentiment. I find evidence of a negative North-South bias emerging during the European debt crisis, a UK-Europe divergence amid Brexit, and a Franco-British bias during the Iraq war. The share price reaction to buy recommendations by more positively biased analysts is weaker.

And from the conclusion:

This paper provides evidence that cultural biases have a significant effect on equity analysts’ stock recommendations. I further find that there is substantial time variation in the effect of such biases, and that the strength of the bias effect is highly correlated with the general sentiment. In other words, bad economic times, when the level of pessimism is high and con- sumer confidence low, are also the times when cultural biases have the largest effect. These findings are all the more significant since equity analysts are financial market professionals that are often supposed to be less susceptible to behavioral biases than non-professionals. To the extent that these results generalize to the rest of the population, they suggest a link between times of economic hardship and increased cultural biases. This might contribute to the rise of nationalism and populism during economic downturns.

My finding that the salience of the firm’s nationality affects the strength of analysts’ cultural biases is also novel in the finance literature. While there is a vast literature on priming effects in psychology literature and, to a lesser extent, in experimental economics, my results suggest that there might be interesting new applications in financial markets and in non-experimental settings that have not been fully explored.

Finally, I find evidence that significant political events can introduce new cultural biases that are strong enough to affect stock recommendations. The much-discussed North-South divide in Europe and the stereotypes of lazy Mediterraneans invoked during the European debt crisis created a clearly visible negative bias in the stock recommendations of North European analysts on South European companies. Similarly, the diplomatic rifts between the UK and the rest of Europe amid the Brexit process, as well as between France and the UK over the Iraq war can be seen in analyst stock recommendations. 

For the pointer I thank the excellent Samir Varma.

Inequality protest sentences to ponder

In countries that did experience mass protests (Chile, Colombia, Ecuador and Bolivia) on the other hand, inequality was either constant or continued to decline in the last few years for which data is available.

Here is the full World Bank blog post by Francisco Ferreira and Marta Schoch.  That is via Gonzalo Schwarz of the Archbridge Institute, Gonzalo just wrote this excellent piece on economic mobility.

Is common stock ownership really such a big deal?

We investigate the relation between common institutional ownership of the firms in an industry and product market competition. We find that common ownership is neither robustly positively related with industry profitability or output prices nor robustly negatively related with measures of non-price competition, as would be expected if common ownership reduces competition. This conclusion holds regardless of industry classification choice, common ownership measure, profitability measure, non-price competition proxy, or model specification. Our point estimates are close to zero with tight bounds, rejecting even modestly-sized economic effects. We conclude that antitrust restrictions seeking to limit intra-industry common ownership are not currently warranted.

That is from a new paper by Andrew Koch, Marios A. Panayides, and Shawn Thomas, forthcoming in the Journal of Financial Economics.  A useful corrective to some of the exaggerations I have seen floating around.

Health care economist sentences to ponder

Various ideas to cut costs in Medicare and Medicaid have been proposed in recent years. Health economists generally oppose those changes.

And this:

If health economists were in charge of the health system, not a lot would change, with some notable exceptions. Medicaid would not have work requirements (which would be unpopular among conservatives in some states), and taxes would go up for Medicare and for employer-based health insurance (which would make it unpopular among just about everybody).

Here is a much longer and excellent piece by Austin Frakt, surveying what health economists in the United States believe about health care policy.  Also do note that health care economists overwhelmingly tend to be Democrats.

What should we think about all this?  That we can trust these health care economists to (more or less) endorse the current system because it is in fact pretty good, relative to available constraints?  That radical reforms, as suggested by say some Democratic presidential candidates, are undesirable and unneeded?  That the Democratic economists who endorse single payer are way overreaching?  Or that these health economists are both deluded — in whichever direction — and also major wusses?

Inquiring minds wish to know.  Here is a related Twitter thread from Michael Cannon.

Claims about white people

Black women for instance, present a consistent pattern of improvement in happiness across decades, while White women display a persistent pattern of decline. In contrast, Black men experienced a discernable pattern of improvement in happiness between the 1970s and 1990s, followed by a leveling off in the early-2000s. White men experienced moderate gains in happiness between the 1970s and 1990s, but after the Great Recession/Obama Era, White male happiness followed a pattern of unprecedented decline, with the “happiness advantage” they once enjoyed (as a group) over Black men and women largely vanishing.

That is by Jason L. Cummings, via the excellent Kevin Lewis.

Education sentences to ponder

The unemployment rate for young college graduates exceeds that of the general population, and about 41 percent of recent college graduates — and 33.8 percent of all college graduates — are underemployed in that they are working in jobs that don’t require a college degree, according to new data from the Federal Reserve Bank of New York.

Here is more from Elizabeth Redden.  The sad thing is, this is evidence of meritocracy, not a stinking economy.

Science sentences to ponder: citations vs. innovations

We demonstrate empirically that measures of novelty are correlated with but distinct from measures of scientific impact, which suggests that if also novelty metrics were utilized in scientist evaluation, scientists might pursue more innovative, riskier, projects.

That is from Jay Bhattacharya and Mikko Packalen in a new NBER working paper and scientific innovation and stagnation.

They point out that Eugene Garfield, the scientist behind the development of citation count, did not think it should be used to evaluate individual scientists.  Overall, citations encourage too much work in crowded, “approaching peak” areas, rather than developing new ideas.  In lieu of citations, the authors suggest using textual analysis to determine how much a paper is building on new ideas rather than on already intensively explored ideas.

Recommended.

When defense is not a public good

Security measures that deter crime may unwittingly displace it to neighboring areas, but evidence of displacement is scarce. We exploit precise information on the timing and locations of all Italian bank robberies and security guard hirings/firings over a decade to estimate deterrence and displacement effects of guards. A guard lowers the likelihood a bank is robbed by 35-40%. Over half of this reduction is displaced to nearby unguarded banks. Theory suggests optimal policy to mitigate this spillover is ambiguous. Our findings indicate restricting guards in sparse, rural markets and requiring guards in dense, urban markets could be socially beneficial.

That is from Vikram Maheshri and Giovanni Mastrobuoni, forthcoming in Review of Economics and Statistics.  Via Peter Deffebach.