Category: Data Source

The effect of banning payday loans

n November 2008, Ohio enacted the Short-Term Loan Law which imposed a 28% APR on payday loans, effectively banning the industry. Using licensing records from 2006 to 2010, I examine if there are changes in the supply side of the pawnbroker, precious-metals, small-loan, and second-mortgage lending industries during periods when the ban is effective. Seemingly unrelated regression results show the ban increases the average county-level operating small-loan, second-mortgage, and pawnbroker licensees per million by 156, 43, and 97%, respectively.

That is from Stefanie R. Ramirez, via the excellent Kevin Lewis.

Are workers exploited in the Chinese manufacturing sector?

Many news outlets and scholars have expressed concerns that workers have been unfairly exploited by employers in the Chinese manufacturing sector. Economic theory suggests that this exploitation, if it exists, is the result of employers in the manufacturing sector having considerable monopsony power. While there is a vast economic literature on monopsony power in the United States and other nations, little monopsony research has been conducted on the Chinese manufacturing market. This paper follows the monopsony research tradition and examines the Chinese manufacturing sector along several likely indicators of monopsony power. These include the turnover rate in the manufacturing sector, the relation between marginal factor cost and average factor cost, the relation between average real labor productivity and real wage in the manufacturing sector, and the comparison of labor costs between China and other countries. This study found that worker exploitation/monopsony in the manufacturing sector is not as severe as previously reported.

Here is the paper, by Linan Peng and Joshua Ingber, both of GMU, via the excellent Kevin Lewis.

Small teams vs. large teams in science

Here we analyse more than 65 million papers, patents and software products that span the period 1954–2014, and demonstrate that across this period smaller teams have tended to disrupt science and technology with new ideas and opportunities, whereas larger teams have tended to develop existing ones.

That is from a new Nature paper by Lingfei Wu, Dashun Wang, and James A. Evans.  Here is the NYT write-up by Benedict Carey.

Will insects go extinct?

No, probably not, no matter what you might have read or seen on Twitter.  The underlying paper is “Worldwide decline of the entomofauna: A review of its drivers.”  Here is a tweet thread by Alex Wild on the paper, here is one bit:

They make a great deal of local extinctions as a sort of proxy for global extinctions. That’s pretty dicey. I mean, bison are locally extinct here in my Austin neighborhood. But their numbers are recovering elsewhere.

They used 73 studies done on different taxa in different places. Those studies must represent tens of thousands of person-hours. Gargantuan. But the input studies weren’t designed for global assessment.

The paper itself has strong evidence on the severe pressure on butterflies and bees, and furthermore the general encroachment of humans on the natural environment probably is going to diminish species numbers and biodiversity, for insects too.  At the same time, the remaining species will adapt and evolve to meet the new potential habitats, with many kinds of insects having an easier time adapting than say gorillas.

The paper has some quite non-dramatic sentences such as: “Studies on ant populations and trends are lacking except for a few invasive species.”  And: “A single long-term study on grasshoppers and crickets is available…”

So I don’t quite see how the authors arrive at: “The conclusion is clear: unless we change our ways of producing food, insects as a whole will go down the path of extinction in a few decades.”  Bryan Caplan, bet away!

Sovereign Bonds since Waterloo — better than you had thought

This paper studies external sovereign bonds as an asset class. We compile a new database of 220,000 monthly prices of foreign-currency government bonds traded in London and New York between 1815 (the Battle of Waterloo) and 2016, covering 91 countries. Our main insight is that, as in equity markets, the returns on external sovereign bonds have been sufficiently high to compensate for risk. Real ex-post returns averaged 7% annually across two centuries, including default episodes, major wars, and global crises. This represents an excess return of around 4% above US or UK government bonds, which is comparable to stocks and outperforms corporate bonds. The observed returns are hard to reconcile with canonical theoretical models and with the degree of credit risk in this market, as measured by historical default and recovery rates. Based on our archive of more than 300 sovereign debt restructurings since 1815, we show that full repudiation is rare; the median haircut is below 50%.

That is from Josefin Meyer, Carmen M. Reinhart, and Christoph Trebesch in a new NBER working paper.

Strict ID Laws Don’t Stop Voters: Evidence from a U.S. Nationwide Panel

U.S. states increasingly require identification to vote – an ostensive attempt to deter fraud that prompts complaints of selective disenfranchisement. Using a difference-in-differences design on a 1.3-billion-observations panel, we find the laws have no negative effect on registration or turnout, overall or for any group defined by race, gender, age, or party affiliation. These results hold through a large number of specifications and cannot be attributed to mobilization against the laws, measured by campaign contributions and self-reported political engagement. ID requirements have no effect on fraud either – actual or perceived. Overall, our results suggest that efforts to reform voter ID laws may not have much impact on elections.

By Enrico Cantoni and Vincent Pons.  Rooftops, shout, mood affiliation, etc.

The wisdom of Ramez Naam, on climate change

From his tweetstorm here are a few bits:

Our biggest climate problems – the sectors that are both large and that lack obvious solutions, are: a) Agriculture and land use changes (AFOLU in the graphic) and b) Manufacturing / Industry. Together, these are 45% of global emissions. And solutions are scarce. 11/

I’m not saying that clean electricity or transport are solved. They’re not. But in electricity, we have solar, wind, batteries growing & getting cheaper & on path for 70-80% decarbonization *at least*. Same with electric cars and trucks. We have momentum in those sectors. 12/

We do NOT have momentum in reducing carbon emissions of agriculture or manufacturing. In agriculture, livestock methane emissions + deforestation to graze livestock are biggest problems. And meat consumption is doubling in next 40 yrs. This should scare you more than coal. 13/

In industry, despite progress in recycling steel, *primary* steel production is still incredibly carbon intensive. As is cement. As is much of manufacturing. We haven’t reached the “solar cheaper than coal” or “EVs cheaper than gasoline” tipping points there. We need to. 14/

If the US is serious about climate policy, it ought to focus on these two sectors – agriculture and industry – that are soon to be the two largest emissions sources, and lack solutions. We should press to invent solutions, drive them down in price, and spread them globally. 16/

Do read the whole thing.

Do land use restrictions increase restaurant quality and diversity?

Daniel Shoag and Stan Veuger say yes, but I am not so convinced.

It turns out that metrics of land use restrictions are correlated with restaurant quality, across cities.  To cut to the chase, Los Angeles ranks number one on this index, and I can agree with that assessment in terms of food quality and also diversity.  (Other good food cities, such as Miami, also rank high on the index.)  Yet for the metropolitan area near L.A., food is generally best where the land use restrictions are least binding.  Beverly Hills and Santa Monica have some decent fancy restaurants, but the real gems are to be found elsewhere, in fringes such as northeast Hollywood, Silverlake (gentrifying a bit too much these days, however), north Orange County, Monterey Park, and so on.  Pasadena has hardly anywhere excellent to eat.

I would suggest an alternative channel of influence: urban areas with high inequality have both better food (see An Economist Gets Lunch, but basically imagine the wealthier people generating demand and the poorer people supplying cheap labor) and more building restrictions.  The wealthier people decide to do something to keep the poorer people out of their neighborhoods.

I hate to say “correlation does not prove causation,” but…correlation does not prove causation.

Via the excellent Kevin Lewis.

Sentences to ponder — *Who Wants to Run?*

Incumbent polarization is also consistently below that of new candidate polarization.

That is from the forthcoming interesting book by Andrew B. Hall.  He also argues that while voters can elect moderates, they cannot force more extreme candidates to govern as moderates.  Furthermore, devaluing office leads to more extreme candidates being interested in running for office.

The book’s argument is that who runs for office helps determine the level of ideological polarization in the legislature.

Engagement with “fake news” on Facebook is declining

In recent years, there has been widespread concern that misinformation on social media is damaging societies and democratic institutions. In response, social media platforms have announced actions to limit the spread of false content. We measure trends in the diffusion of content from 569 fake news websites and 9,540 fake news stories on Facebook and Twitter between January 2015 and July 2018. User interactions with false content rose steadily on both Facebook and Twitter through the end of 2016. Since then, however, interactions with false content have fallen sharply on Facebook while continuing to rise on Twitter, with the ratio of Facebook engagements to Twitter shares decreasing by 60 percent. In comparison, interactions with other news, business, or culture sites have followed similar trends on both platforms. Our results suggest that the relative magnitude of the misinformation problem on Facebook has declined since its peak.

That is from a new NBER working paper by Allcott, Gentzkow, and Yu.

San Francisco fact of the day

San Francisco has more drug addicts than it has students enrolled in its public high schools, the city Health Department’s latest estimates conclude.

There are about 24,500 injection drug users in San Francisco — that’s about 8,500 more people than the nearly 16,000 students enrolled in San Francisco Unified School District’s 15 high schools

Here is more, via an MR reader.

The Impact of the Affordable Care Act: Evidence from California’s Hospital Sector

The Affordable Care Act (ACA) authorized the largest expansion of public health insurance in the U.S. since the mid-1960s. We exploit ACA-induced changes in the discontinuity in coverage at age 65 using a regression discontinuity based design to examine effects of the expansion on health insurance coverage, hospital use, and patient health. We then link these changes to effects on hospital finances. We show that a substantial share of the federally-funded Medicaid expansion substituted for existing locally-funded safety net programs. Despite this offset, the expansion produced a substantial increase in hospital revenue and profitability, with larger gains for government hospitals. On the benefits side, we do not detect significant improvements in patient health, although the expansion led to substantially greater hospital and emergency room use, and a reallocation of care from public to private and better-quality hospitals.

That is from a new NBER working paper by Mark Duggan, Atul Gupta, and Emilie Jackson.

IQ economics > behavioral economics

We use administrative and survey-based micro data to study the relationship between cognitive abilities (IQ), the formation of economic expectations, and the choices of a representative male population. Men above the median IQ (high-IQ men) display 50% lower forecast errors for inflation than other men. The inflation expectations and perceptions of high-IQ men, but not others, are positively correlated over time. High-IQ men are also less likely to round and to forecast implausible values. In terms of choice, only high-IQ men increase their propensity to consume when expecting higher inflation as the consumer Euler equation prescribes. High-IQ men are also forward-looking — they are more likely to save for retirement conditional on saving. Education levels, income, socio-economic status, and employment status, although important, do not explain the variation in expectations and choice by IQ. Our results have implications for heterogeneous-beliefs models of household consumption, saving, and investment.

That is from a new NBER working paper by Francesco D’Acunto, Daniel Hoang, Maritta Paloviita, and Michael Weber.

Does “putting yourself in the shoes of others” reduce attitude change?

From Rhia Catapano, Zakary L. Tormala, and Derek D. Rucker:

Counterattitudinal-argument generation is a powerful tool for opening people up to alternative views. On the basis of decades of research, it should be especially effective when people adopt the perspective of individuals who hold alternative views. In the current research, however, we found the opposite: In three preregistered experiments (total N = 2,734), we found that taking the perspective of someone who endorses a counterattitudinal view lowers receptiveness to that view and reduces attitude change following a counterattitudinal-argument-generation task. This ironic effect can be understood through value congruence: Individuals who take the opposition’s perspective generate arguments that are incongruent with their own values, which diminishes receptiveness and attitude change. Thus, trying to “put yourself in their shoes” can ultimately undermine self-persuasion. Consistent with a value-congruence account, this backfire effect is attenuated when people take the perspective of someone who holds the counterattitudinal view yet has similar overall values.

Yes, yes the replication crisis.  Still, this may be a useful countertonic against the notion that trying to understand other people always yields high returns.  Perhaps the better approach is simply to drain yourself of values when considering the perspectives of other people.

Eric Kaufmann’s *Whiteshift*

The subtitle is Populism, Immigration, and the Future of White Majorities, and might this be the must-read book of the year?  It is “to the right” of my views on immigration policy, but still I found it informative, fascinating, and relevant on just about every page.  Here is the author’s opening framing:

First, why are right-wing populists doing better than left-wing ones?  Second, why did the migration crisis boost populist-right numbers sharply while the economic crisis had no overall effect?  If we stick to data, the answer is crystal clear.  Demography and culture, not economic and political developments, hold the key to understanding the populist moment.

Kaufmann, by the way, is Professor of Politics at Birkbeck in London, but hails from Canada.  As for the basics, there is this in addition:

Much of this book is concerned with the clash between a rising white tribalism and an ideology I term ‘left-modernism.’

If you wish to understand “all the stuff that is going on today,” maybe Whiteshift is the best place to start?  Kaufmann, by the way, is not a mega-pessimist and he seems to think that “broadening the category of white” will lead to a “good enough” solution for many of the Western democracies.  Still, much of this book is disturbing, especially for readers who might consider themselves to be on the left.  Most of all, he sees “whiteness” as a legitimate cultural interest, and one which, if we deny, will lead to more overt racism rather than less.

Here is Kaufmann on Brexit, brutal but I think largely correct:

…many analysts bring a political lens to their analysis which inclines them to want to tell a story about wealth and power.  Over half the country voted Leave and we can’t condemn such a large group.  So we pretend populist voters are motivated by the same things we are: economic stagnation (for fiscal conservatives) or, for left-liberals, inequality and resentment of the establishment.

Kaufmann also has strong evidence for the “immigration backlash” hypothesis, for instance:

…a higher immigrant share is a consistent predictor of higher opposition to immigration over time…in Western Europe there is a .63 correlation between projected 2030 Muslim share and the highest poll or vote share a populist-right party has achieved.

On top of all of its other virtues, Whiteshift provides the best intellectual history of the immigration debates I have seen.  It also has the best discussion of why Canada seems to be different when it comes to immigration, and I may cover that in another blog post.

Kaufmann does very much argue that the left-wing values of diversity and solidarity stand very much in conflict.  How is this for an “ouch” sentence?:

Casual observation would suggest that being black in diverse San Francisco is not necessarily better than being black in white-majority Fargo [North Dakota].

By no means am I convinced by everything in this book.  I don’t think European politics can handle systematized refugee camps in Europe itself (rather than Turkey and Lebanon), and most of all I am not sure that recognizing whiteness as a legitimate cultural concern will diminish rather than boost racism.  I wish he had said much more about gender, and how immigration and gender issues interact.

Nonetheless this book has more points of interest yet, including an original and persuasive take on residential clustering, a good analysis of racial intermarriage, and a sustained argument that avoiding the “no dominant ethnic group” approach of Guyana and Mauritius is imperative.

Strongly recommended, it is out next week, you can pre-order here.