NBER Reporter NATIONAL BUREAU OF ECONOMIC RESEARCH

A quarterly summary of NBER research No. 4, December 2019

Program Report

ALSO IN THIS ISSUE Elasticity of Net Entry to Tobin’s q Across Industries Health Care 1.5%

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0.9 Jonathan Gruber*

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-0.3 The rise of the US health-care sector over the past several decades has been remarkable. As Figure 1 [page 3, top] shows, in 1970, the country -0.6 1971 1975 1979 1983 1987 1991 1995 1999 2003 2007 2011 2015 devoted slightly more than 6 percent of GDP to health care, about 1 per-

Source: Researchers’ calculations using data from Compustat cent more than other nations. Today, the nation devotes almost 18 percent of GDP to health care, which is larger than spending on cars, clothing, food, furniture, housing, fuel, and recreation combined — and is a full 8 The Economics and Politics percent above the average in comparable countries. of Market Concentration 10 Health outcomes haven’t kept up, as shown in Figure 2 [page 2, bot- Interbank Network Risk, tom left]. US life expectancy was slightly below the average of comparable Regulation, and Financial Crises 13 countries in 1980. Today it has fallen far below that of these other coun- Economics and Behavioral Health 16 tries, with life expectancy actually declining for the first time in decades. These striking facts have motivated a sharp increase in the quality and Household Expectations: quantity of work in the NBER Health Care Program. From a handful of From Neuroscience to Household working papers in 1992, this program has grown to produce an average Finance and Macroeconomics 20 of more than 100 working papers a year in the last three full years. These NBER News 23 papers reflect the larger interest of the economics profession in health Conferences 26 issues. In 1990, the American Economic Review published just two articles about health; now it publishes about five a year. In theAmerican Economic Program and Working Group Meetings 31 Journals in Economic Policy and Applied Economics, major new general- NBER Books 46 interest journals that cover health topics, about one in eight articles pub- lished in 2017 focused on health. The Health Care Program has expanded and drawn in a new generation of health economists. In this review, I cover developments in the NBER Health Care Program over the last seven years. This has been a period both of substantial upheaval in the health-care sector and of rapid growth of studies of that sec-

*Jonathan Gruber is the Ford Professor of Economics at MIT. He is an NBER research associate and has been director of the bureau’s Health Care Program for the past decade. Gruber was an architect of health care reform efforts in Massachusetts and consulted with the Obama Administration on creation of the Affordable Care Act.

Reporter Online at: www.nber.org/reporter tor, with 674 working papers posted in the Physician Behavior program since 2012. These studies have cov- Health Expenditures as a Percent of GDP, 1970–2017 ered a broad array of topics, and it is impos- A common refrain in health economics is that the most expen- NBER Reporter 20% sible to do them justice in this short review. sive piece of medical technology is the physician’s pen, yet there is

Instead, I will highlight a few key areas of 17.1% relatively little understanding of the physician behaviors that drive study by NBER researchers, with apologies 15 medical spending. A set of recent papers has made enormous prog- The National Bureau of Economic Research is a private, nonprofit research orga- United States nization founded in 1920 and devoted to objective quantitative analysis of the to the large number of authors of studies ress in helping us understand physician decision-making and its American economy. Its officers and board of directors are: that I am excluding. implications for the health-care system. President and Chief Executive Officer — James M. Poterba 10 10.5% One of the enduring mysteries in health care is the enormous Controller — Kelly Horak The Affordable Care Act variation among physicians in treatment styles. These differences Corporate Secretary — Alterra Milone emerge in physician training.11 David Cutler, Jonathan Skinner, 6.2% 5 Comparable country average BOARD OF DIRECTORS The ACA is the most significant gov- 4.9% Ariel Dora Stern, and David Wennberg use surveys of physi- Chair — Karen N. Horn ernment intervention in the US health-care cians to show that much of the variation reflects physician beliefs Vice Chair — John Lipsky system since the introduction of Medicare unsupported by clinical evidence.12 There is mixed evidence on Treasurer — Robert Mednick and Medicaid. Moreover, it was introduced 0 the welfare implications of physician treatment variation. Gautam DIRECTORS AT LARGE both in a data-rich environment in which 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 Gowrisankaran, Keith Joiner, and Pierre-Thomas Léger find that Peter Aldrich Jacob A. Frenkel Michael H. Moskow many datasets can be used to analyze its physicians randomly assigned to different emergency department Elizabeth E. Bailey Robert S. Hamada Alicia H. Munnell Health expenditures do not include investments in structures, equipment, or research. The set of comparable countries Susan M. Collins Peter Blair Henry Robert T. Parry impacts, and in a manner that generated includes Australia, Austria, Belgium, Canada, France, Germany, Japan, Netherlands, Switzerland, and the United Kingdom doctors who are more skilled see higher resource use, but not nec- Kathleen B. Cooper Karen N. Horn Douglas Peterson quasi-experimental variation that can be Source: Kaiser Family Foundation analysis of OECD and National Health Expenditure data essarily better outcomes.13 In contrast, Janet Currie, W. Bentley Charles H. Dallara Lisa Jordan James M. Poterba used to convincingly estimate those impacts. MacLeod, and Jessica Van Parys find that for heart attack patients, George C. Eads John Lipsky John S. Reed Jessica P. Einhorn Laurence H. Meyer Mark Weinberger In particular, the enormous expansion of Figure 1 there is large variation in treatment intensity across providers, and Mohamed El-Erian Karen Mills Martin B. Zimmerman the Medicaid program to all those whose income is less show that the ACA clearly has expanded coverage [Figure 3] those who treat more intensively deliver better outcomes.14 Diana Farrell than 133 percent of the poverty line, which occurred through provisions such as extending coverage of dependents up to A related question is whether more information provided only in a subset of states and over time in those states, age 26,2,3 expanding Medicaid,4 and subsidizing premiums in the to patients can improve outcomes and performance. Jonathan DIRECTORS BY UNIVERSITY APPOINTMENT provides a natural case study for understanding the new exchange.5 Notable is the finding of that last paper that much Kolstad finds that when “report cards” were introduced on sur- Timothy Bresnahan, Stanford Samuel Kortum, Yale Pierre-André Chiappori, Columbia George Mailath, Pennsylvania impact of expanded insurance coverage. This has pro- of the increase in Medicaid enrollment was not from those who geon outcomes in Pennsylvania, surgeons responded strongly to Alan V. Deardorff, Michigan Marjorie B. McElroy, Duke vided a wonderful environment for economic research. were newly eligible, but from those previously eligible who had poor performance relative to their peers, suggesting a strong role Edward Foster, Minnesota Joel Mokyr, Northwestern Health Care Program affiliates’ research on the now enrolled in the program. for “intrinsic motivation.”15 At the same time, Erin Johnson and John P. Gould, Chicago Cecilia Elena Rouse, Princeton 16 Mark Grinblatt, , Richard L. Schmalensee, ACA has covered a wide variety of areas, but has There has also been a clear increase in health-care utiliza- M. Marit Rehavi, and in another study, Michael Frakes, Anupam California Los Angeles MIT 6 Bruce Hansen, Wisconsin-Madison Ing o Wa l t er, New York focused primarily on the impacts of the ACA on insur- tion in response to broadened insurance coverage. Early studies Jena, and I find that when physicians are themselves patients, they Benjamin Hermalin, California, Berkeley David B. Yoffie, Harvard ance coverage, health-care utilization, and health, as have generally found positive impacts of the ACA on population receive a quality of care similar to that of comparable non-physi- 1 17 DIRECTORS BY APPOINTMENT OF OTHER ORGANIZATIONS reviewed by Benjamin Sommers and me. Studies health, but more work is needed to assess the long-term impacts on cian patients. 7 Jean-Paul Chavas, Agricultural and Applied Economics Association health. Martin Gruber, American Finance Association A particularly nota- Philip Hoffman, Economic History Association Average Life Expectancy at Birth, 1980–2017 ble area of research on the Percentage of Non-Elderly without Health Insurance Arthur Kennickell, American Statistical Association Jack Kleinhenz, National Association for Business Economics ACA has been focused on 86 years 20% Robert Mednick, American Institute of Certified Public Accountants US Germany UK Canada France Spain Japan the impact of the law’s pro- National Health Interview Survey data Peter L. Rousseau, American Economic Association visions on labor market 18 Gregor W. Smith, Canadian Economics Association 84 William Spriggs, American Federation of Labor and behavior, with mixed results. 16 Congress of Industrial Organizations 82 Research on a large restric- 14 Bart van Ark, The Conference Board tion on health insurance cov- Current Population Survey data Gallup data 12 The NBER depends on funding from individuals, corporations, and private 80 erage in Tennessee before the foundations to maintain its independence and its flexibility in choosing its ACA showed an associated 10 research activities. Inquiries concerning contributions may be addressed to James 78 significant rise in labor force 8 M. Poterba, President & CEO, NBER, 1050 Massachusetts Avenue, Cambridge, ACA signed into law participation, suggesting that 6 MA 02138-5398. All contributions to the NBER are tax-deductible. 76 expansions under the ACA 4 The Reporter is issued for informational purposes and has not been reviewed by 74 might reduce the supply of the Board of Directors of the NBER. It is not copyrighted and can be freely repro- labor.8 But studies of both 2 duced with appropriate attribution of source. Please provide the NBER’s Public 0 Information Department with copies of anything reproduced. 72 the expansion of insurance to 1980 1985 1990 1995 2000 2005 2010 2015 young adults 9 and the overall 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 Requests for subscriptions, changes of address, and cancellations should be sent effects of the ACA exchanges to Reporter, National Bureau of Economic Research, Inc., 1050 Massachusetts Source: United Nations Population Division 10 Source: Gruber J. and Sommers B., NBER Working Paper 25932 Avenue, Cambridge, MA 02138-5398 (please include the current mailing label), and Medicaid exchanges do or by email to [email protected]. Print copies of the Reporter are only mailed to not find significant impacts subscribers in the U.S. and Canada; those in other nations may request electronic Figure 2 on labor supply. Figure 3 subscriptions at www.nber.org/drsubscribe/.

2 NBER Reporter • No. 4, December 2019 NBER Reporter • No. 4, December2019 3 One recent development in health quality care, that government measures Jill Horwitz, Charleen Hsuan, and Hermosilla find that the introduc- Conti, and Stephen Murphy survey the plans, that these choices don’t get better economics is an ongoing integration of hospital quality are representative of Austin Nichols find that hospitals respond tion of drug insurance for elderly peo- market for generic drugs and find a lim- with more experience,40 and that limiting with the field of industrial organization, true quality,23 and that a major source to a competitor’s adoption of intensive car- ple under Medicare Part D led to the ited number of competitors for many choice sets can lead to improved choice allowing for new lessons about physi- of inefficiency in health-care spending is diac services by adopting the same services, development of more drugs targeted to generics, decreasing the price reduction outcomes.41 Saurabh Bhargava, George cian (and other provider) market behav- variations across hospitals in their asso- leading to duplication and higher costs.28 the elderly — but mostly for diseases that that can be expected after patent expi- Loewenstein, and Justin Sydnor42 and ior. For example, Kate Ho and Ariel ciated post-discharge spending.24 Paul On the other hand, Gowrisankaran, Aviv already had multiple treatments.32 On ration.37 At the same time, both they Chenyuan Liu and Sydnor deliver par- Pakes find that when physicians are Eliason, Paul Grieco, Ryan McDevitt, Nevo, and Robert Town find that hospi- the other hand, Joshua Krieger, Danielle and Richard Frank, Andrew Hicks, and ticularly compelling evidence for choice more highly “capitated” (paid a fixed and James Roberts focus on the partic- tals’ market power is greatly constrained Li, and Dimitris Papanikolaou find that Berndt find that overall generic drug inconsistencies by showing the pervasive amount per patient, rather than receiv- ular case of long-term acute care hospi- by their negotiations with managed care financial shocks to pharmaceutical manu- prices are falling substantially over time.38 nature of “dominated” choices in health ing cost-based reimbursement), they are tals, showing that these hospitals stra- insurers,29 and Craig, Matthew Grennan, facturers lead to the development of drugs In one particularly important market seg- insurance markets.43 Richard Domurat, more likely to refer and Ashley Swanson that are more novel, in the sense that they ment, Conti and Berndt find that the Isaac Menashe, and Wesley Yin run a 33 to lower-cost hospi- Hospital-Price Variation for a Colonoscopy in Philadelphia, 2011 find that mergers differ more from previous discoveries. prices of specialty drugs fell significantly field experiment randomly providing tals.18 Lawrence Baker, between hospitals lead In either case, the returns to R&D are after a generic entered the market.39 reminders about insurance deadlines to M. Kate Bundorf, and to lower input acqui- quite high. Pierre Azoulay, Joshua Graff consumers; they find that such remind- $4,000 Daniel Kessler study sition prices through Zivin, Li, and Bhaven Sampat use idio- Health Insurance Markets ers are particularly effective among the 44 the rapidly growing Each bar represents the average better negotiating syncratic rigidities in the rules governing healthiest consumers. phenomenon of verti- private-payer price for a colonoscopy at 1 power.30 Investigating National Institutes of Health peer review A particularly notable feature of The second major issue with health 3,000 of 16 hospitals in the Philadelphia market. cal integration among Medicare reimbursement rate another impor- to show that NIH funding spurs the US health-care markets is the relatively insurance choice is the potential for physicians, whereby Negotiated price tant aspect of hospi- development of private-sector patents: a unregulated multi-payer system for adverse selection and the need for risk generalists and special- tal market structure, $10 million boost in adjusters to offset this ists merge their prac- 2,000 Cory Capps, Dennis NIH funding leads to market failure. Several tices; the researchers Carlton, and Guy a net increase of 2.3 Private Financing of Clinical Trials and Patient Survival Rate studies have docu- find that such integra- David find no evidence patents.34 mented how concerns 1,000 tion raises prices for that nonprofit hos- Heidi Williams Share of trials that are privately financed over adverse selection 50% both types of physi- pitals are more likely and her coauthors have drive insurer behavior, cians, particularly in than for-profit hos- studied the incentives leading, for example, 0 less-competitive mar- pitals to use the extra put in place by the US 40 to higher premiums kets.19 Jeffrey Clemens Sample of 16 Philadelphia hospitals resources from mar- patent system. Sampat for small firms with and Joshua Gottlieb ket consolidation to and Williams find that sicker employees,45 or Source: Cooper Z., Stuart C., Gaynor M., Van Reenen J., NBER Working Paper 21815 find that when private deliver charity care to gene sequences that are 30 to lower plan gener- insurers set reimburse- uninsured people.31 patented are more valu- osity when Medicare ment rates for physi- Figure 4 able than those that are enrollees could more cians, they closely follow the rates set by tegically discharge patients when there Pharmaceutical Economics not, and that, control- 20 easily move from plan Medicare,20 although Clemens, Gottlieb, is a large financial bonus for doing so, ling for this selection to plan.46 A series of 25 and Tímea Laura Molnár find that private leading to worse patient outcomes. Prescription drug spending has effect, on average, gene 10 studies by Thomas rates deviate most from Medicare when Liran Einav, Amy Finkelstein, and Neale become a larger share of health-care patents have no effect 0% 20 40 60 80 100 McGuire and his co- the Medicare rate differs strongly from Mahoney document that care received spending over the past few decades, grow- on follow-on innova- Five-year patient survival rate authors explored the the true marginal cost of the procedure.21 at these hospitals would have counter- ing from 5 percent of spending in 1980 tion.35 At the same theoretical and empir- Shaded-blue region represents 95% confidence interval factually been delivered at a much lower to 10 percent today. This is partly due to time, Eric Budish, Source: Budish E., Roin B., Williams H., NBER Working Paper 19430 ical determinants of Hospitals cost in other facilities, so that Medicare the high cost of drug development, esti- Benjamin Roin, and optimal risk adjust- could save almost $5 billion per year mated at $2 billion or more annually. The Williams document Figure 5 ment, raising issues Hospitals remain the largest single by not allowing discharges to these enormous risk and returns associated with that innovations with such as the combi- source of health-care spending, and this providers.26 drug development have led to significant a long development period are less likely financing care, and more than 100 work- nation of different forms of reinsur- area continues to be a focus of NBER Another emerging topic of study research on the determinants and out- to be privately financed, since the pat- ing papers in the last six years focused on ance and risk adjustment.47 A key issue researchers. A number of studies have is the role of hospital market struc- comes of pharmaceutical R&D, and on ent protection provided when the drug the health insurance market. In particu- that must be evaluated with these sys- attempted to measure and compare the ture. Motivating interest in this area is the role of patent protection and generic is finally developed is very short-lived.36 lar, the wide variety of health insurance tems is insurer responses. For example, efficiency of care delivery across hospi- the widely cited study by Zack Cooper, competition in determining the long-run [Figure 5] choices facing consumers and firms raises Michael Geruso and Timothy Layton tals. Joseph Doyle, John Graves, Samuel Stuart Craig, Martin Gaynor, and John returns to these R&D investments. Other studies have examined the at least two important questions. show how insurers “upcode” their enroll- Kleiner, and I have studied relative hos- Van Reenen that used newly available Recent studies document that the generic drug market that results from the The first is how well do consumers ees to qualify for higher-risk adjustment pital treatment of emergency patients data to document the enormous varia- financial resources available to pharma- expiration of patent coverage — a mar- do in choosing their health insurance payments.48 Finally, Benjamin Handel, who are quasi-randomly assigned by tion in prices among hospitals for very ceutical manufacturers determine the ket that has attracted much recent news plan, given the complicated nature of this Kolstad, and Johannes Spinnewijn high- preferences of different ambulance com- similar procedures; they also find that pace and nature of innovation, with coverage due to enormous price increases decision. Jason Abaluck and I document light the trade-off between choice incon- panies.22 Doyle, Graves, and I find that prices are higher in less competitive mar- somewhat differing conclusions. David for some off-patent drugs. Consistent that individuals appear to make highly sistencies and adverse selection, and the higher-cost hospitals deliver higher- kets.27 [Figure 4] Dranove, Craig Garthwaite, and Manuel with these headlines, Ernst Berndt, Rena inconsistent choices of health insurance implications for insurance design.49

4 NBER Reporter • No. 4, December 2019 NBER Reporter • No. 4, December 2019 5 International Comparisons finds that reduced cost-sharing for elderly ates of the NBER’s Health Care Program Paper 22182, April 2016. 10 “The Effects of the Affordable Care Baker L, Bundorf M, Kessler D. NBER people in Japan leads to more use of over the past seven years. These research- Return to Text Act on Health Insurance Coverage and Working Paper 23871, September 2017. There is a long-standing recognition both inpatient and outpatient care, with ers are pushing the boundaries of knowl- 5 “Premium Subsidies, the Mandate, and Labor Market Outcomes,” Duggan M, Return to Text that the United States is an outlier in little impact on health but large reduc- edge in a wide variety of directions, and Medicaid Expansion: Coverage Effects Goda G, Jackson E. NBER Working 20 “In the Shadow of a Giant: Medicare’s terms of health-care spending relative to tions in out-of-pocket expenditures.56 their efforts are likely to continue in the of the Affordable Care Act,” Frean M, Paper 23607, July 2017. Influence on Private Physician GDP. This suggests that our nation has Stephen Pichler and Nicholas Ziebarth coming years. The ongoing implementa- Gruber J, Sommers B. NBER Working Return to Text Payments,” Clemens J, Gottlieb J. NBER much to learn from other countries, and use data from Germany and the US to tion of the ACA provides a fruitful labo- Paper 22213, December 2016. 11 “Informational Frictions and Practice Working Paper 19503, October 2013. an array of studies has brought key lessons document the importance of “presentee- ratory for studies of the role of insurance, Return to Text Variation: Evidence from Physicians in Return to Text to the fore. ism,” whereby sick employees coming to while the continual threat of unaffordable 6 “Effects of Federal Policy to Insure Training,” Chan D. NBER Working 21 “The Anatomy of Physician A number have focused explicitly on work leads to more lost time for others, increases in health-care costs will inspire Young Adults: Evidence from the Paper 21855, January 2016. Payments: Contracting Subject to comparing the US to other nations. Cutler suggesting the value of providing sick new work on drivers of spending. The 2010 Affordable Care Act Dependent Return to Text Complexity,” Clemens J, Gottlieb J, and Adriana Lleras-Muney review the evi- leave to workers.57 introduction of innovative new genetic Coverage Mandate,” Antwi Y, Moriya A, 12 “Physician Beliefs and Patient Molnár T. NBER Working Paper 21642, dence from around the world on how edu- A notable recent development is the therapies will motivate ongoing work on Simon K. NBER Working Paper 18200, Preferences: A New Look at Regional October 2015. cation improves health outcomes.50 Alice rapid growth of work by Health Care R&D and the financing of novel treat- June 2012; “The Effect of Insurance Variation in Health Care Spending,” Return to Text Chen, Emily Oster, ments. The increas- Expansions on Smoking Cessation Cutler D, Skinner J, Stern A, Wennberg 22 “Do High-Cost Hospitals Deliver and Williams provide The Eect of Education on Health Outcomes, by Country GDP ing depth and Medication Prescriptions: Evidence from D. NBER Working Paper 19320, August Better Care? Evidence from Ambulance evidence that the steep diversity of new ACA Medicaid Expansion,” Maclean J, 2013. Referral Patterns,” Doyle J, Graves J, Coe†icient of education on body mass index Coe†icient of education on smoking rate gradient in infant out- 0.4 0.02 data sources, in the Pesko M, Hill S. NBER Working Paper Return to Text Gruber J, Kleiner S. NBER Working comes with respect to Portugal US and around 23450, May 2017; “The Effect of Public 13 “Physician Practice Style and Paper 17936, March 2012. US income is largely Albania the world, makes Insurance Expansions on Substance Use Healthcare Costs: Evidence Return to Text Zambia Namibia 0.2 0 Moldova 23 driven by post-delivery Greece ever more exciting Disorder Treatment: Evidence from the from Emergency Departments,” “Evaluating Measures of Hospital Nigeria Ireland Maldives Cyprus Denmark differences in care, par- Austria research feasible. Affordable Care Act,” Maclean J, Saloner Gowrisankaran G, Joiner K, Léger P. Quality,” Doyle J, Graves J, Gruber J. Swaziland Egypt Uganda ticularly care delivered Rwanda B. NBER Working Paper 23342, April NBER Working Paper 24155, December NBER Working Paper 23166, February Austria Germany 51 0 -0.02 Nepal in the home. Michael Estonia 2017; “Effects of the Affordable Care 2017. 2017. Bolivia Lesotho Finland 1 Baker, Currie, and UK US “The Affordable Act on Health Behaviors after Three Return to Text Return to Text Hannes Schwandt,52 Moldova Netherlands Care Act’s Effects Years,” Courtemanche C, Marton J, 14 “Physician Practice Style and Patient 24 “Uncovering Waste in US Healthcare,” -0.2 -0.04 Hungary Lithuania Denmark and, in another study, Finland UK on Patients, Ukert B, Yelowitz A, Zapata D. NBER Health Outcomes: The Case of Heart Doyle J, Graves J, Gruber J. NBER Ireland Slovakia Currie, Schwandt US Providers and the Working Paper 24511, April 2018. Attacks,” Currie J, MacLeod W, Van Working Paper 21050, March 2015. and Josellin Thuilliez -0.4 -0.06 Belgium Economy: What Return to Text Parys J. NBER Working Paper 21218, Return to Text 4 6 8 10 12 4 6 8 10 12 7 25 compare mortality Log of per capita GDP, 2012 US dollars Log of per capita GDP, 2012 US dollars We’ve Learned “Early Effects of the Affordable Care May 2015. “Strategic Patient Discharge: The inequality in the US So Far,” Gruber J, Act on Health Care Access, Risky Return to Text Case of Long-Term Care Hospitals,” In countries with more negative coeicient values, there is a stronger negative relationship in the population 15 with that in Canada, between an individual's education and his or her body mass index and likelihood of smoking. Sommers B. NBER Health Behaviors, and Self-Assessed “Information and Quality when Eliason P, Grieco P, McDevitt R, where the inequality Source: Cutler D., Lleras-Muney A., NBER Working Paper 17738 Working Paper Health,” Courtemanche C, Marton J, Motivation is Intrinsic: Evidence from Roberts J. NBER Working Paper 22598, of health outcomes has 25932, June 2019. Ukert B, Yelowitz A, Zapata D. NBER Surgeon Report Cards,” Kolstad J. September 2016. declined, and France, Figure 6 Return to Text Working Paper 23269, March 2017; NBER Working Paper 18804, February Return to Text where inequality remains pervasive.53 Program affiliates on developing coun- 2 “Effects of Federal Policy to Insure “Impacts of the Affordable Care Act 2013. 26 “Long-Term Care Hospitals: A Case Jillian Chown, Dranove, Garthwaite, and tries, likely motivated by synergies Young Adults: Evidence from the Dependent Coverage Provision on Return to Text Study in Waste,” Einav L, Finkelstein Jordan Keener compare health care prices with NBER’s Development Economics 2010 Affordable Care Act Dependent Health-Related Outcomes of Young 16 “Physicians Treating Physicians: A, Mahoney N. NBER Working Paper between the US and Canada, finding that Program. Topics vary from the ben- Coverage Mandate,” Antwi Y, Moriya A, Adults,” Barbaresco S, Courtemanche C, Information and Incentives in 24946, August 2018. while the US pays much more for drugs, efits of universal health care provision Simon K. NBER Working Paper 18200, Qi Y. NBER Working Paper 20148, May Childbirth,” Johnson E, Rehavi M. Return to Text our physicians do not appear to earn more in Turke y, 58 to investigations of adult June 2012. 2014. NBER Working Paper 19242, July 2013. 27 “The Price Ain’t Right? Hospital relative to the general skill differential in mortality after a tsunami in the Indian Return to Text Return to Text Return to Text Prices and Health Spending on the pay in the US versus Canada.54 Ocean,59 to experimental evidence on the 3 “The Role of Federal and State 8 “Public Health Insurance, Labor 17 “Is Great Information Good Enough? Privately Insured,” Cooper Z, Craig Other papers investigate policy inter- promotion of iron-fortified salt in rural Dependent Coverage Eligibility Policies Supply, and Employment Lock,” Evidence from Physicians as Patients,” S, Gaynor M, Van Reenen J. NBER ventions in other developed nations that India,60 to audit studies illustrating the on the Health Insurance Status of Young Garthwaite C, Gross T, Notowidigdo M. Frakes M, Gruber J, Jena A. NBER Working Paper 21815, December 2015. may contain lessons for the US. Thomas poor quality of primary health care in Adults,” Cantor J, Monheit A, DeLia D, NBER Working Paper 19220, July 2013. Working Paper 26038, July 2019. Return to Text Hoe, George Stoye, and I investigate a India,61 to the impact of a tobacco control Lloyd K. NBER Working Paper 18254, Return to Text Return to Text 28 “The Role of Hospital and Market UK policy that imposes strict penalties campaign in Uruguay. July 2012. 9 “The Impact of the Affordable 18 “Hospital Choices, Hospital Prices Characteristics in Invasive Cardiac on emergency rooms for long waiting Return to Text Care Act Young Adult Provision on and Financial Incentives to Physicians,” Service Diffusion,” Horwitz J, Hsuan times.55 We find that these incentives lead Where to Next? 4 “Impacts of the Affordable Care Act on Childbearing, Marriage, and Tax Filing Ho K, Pakes A. NBER Working Paper C, Nichols A. NBER Working Paper not only to shorter waiting times, with Health Insurance Coverage in Medicaid Behavior: Evidence from Tax Data,” 19333, March 2014. 23530, June 2017. more use of the hospital and higher med- The studies summarized here only Expansion and Non-Expansion States,” Heim B, Luri I, Simon K. NBER Return to Text Return to Text ical spending, but also to better health begin to describe the enormous scope of Courtemanche C, Marton J, Ukert B, Working Paper 23092, January 2017. 19 “Does Multispecialty Practice 29 “Mergers When Prices are outcomes. [Figure 6] Hitoshi Shigeoka work that has been undertaken by affili- Yelowitz A, Zapata D. NBER Working Return to Text Enhance Physician Market Power?” Negotiated: Evidence from the

6 NBER Reporter • No. 4, December 2019 NBER Reporter • No. 4, December 2019 7 Hospital Industry,” Gowrisankaran E. NBER Working Paper 26120, July T, Schillo S, van Kleef R. NBER Healthcare: Evidence from the United 57 “The Pros and Cons of Sick Pay Frankenberg E, Sumantri C, Thomas G, Nevo A, Town R. NBER Working 2019. Working Paper 25374, December States and Canada,” Chown J, Dranove Schemes: Testing for Contagious D. NBER Working Paper 22317, June Paper 18875, March 2013. Return to Text 2018; “Assessing Incentives for D, Garthwaite C, Keener J. NBER Presenteeism and Noncontagious 2016. Return to Text 39 “Specialty Drug Prices and Adverse Selection in Health Plan Working Paper 26122, July 2019. Absenteeism Behavior,” Pichler S, Return to Text 30 “Mergers and Marginal Costs: New Utilization after Loss of US Patent Payment Systems,” Layton T, Ellis Return to Text Ziebarth N. NBER Working Paper 60 “Can Iron-Fortified Salt Control Evidence on Hospital Buyer Power,” Exclusivity, 2001–07,” Conti R, R, McGuire T. NBER Working 55 “Saving Lives by Tying Hands: The 22530, August 2016. Anemia? Evidence from Two Craig S, Grennan M, Swanson A. Berndt E. NBER Working Paper Paper 21531, September 2015; “Risk Unexpected Effects of Constraining Return to Text Experiments in Rural Bihar,” Banerjee NBER Working Paper 24926, August 20016, March 2014. Corridors and Reinsurance in Health Health Care Providers,” Gruber J, Hoe 58 “The Value of Socialized Medicine: A, Barnhardt S, Duflo E. NBER 2018. Return to Text Insurance Marketplaces: Insurance T, Stoye G. NBER Working Paper The Impact of Universal Primary Working Paper 22121, March 2016. Return to Text 40 “Evolving Choice Inconsistencies for Insurers,” Layton T, McGuire T, 24445, March 2018. Healthcare Provision on Mortality Return to Text 31 “Antitrust Treatment of Nonprofits: in Choice of Prescription Drug Sinaiko A. NBER Working Paper Return to Text Rates in Turkey,” Cesur R, Gunes P, 61 “Quality and Accountability in Should Hospitals Receive Special Insurance,” Abaluck J, Gruber J. NBER 20515, September 2014; “Tradeoffs 56 “The Effect of Patient Cost Sharing Tekin E, Ulker A. NBER Working Health-Care Delivery: Audit-Study Care?” Capps C, Carlton D, David Working Paper 19163, June 2013. in the Design of Health Plan Payment on Utilization, Health, and Risk Paper 21510, August 2015. Evidence from Primary Care in G. NBER Working Paper 23131, Return to Text Systems: Fit, Power and Balance,” Protection,” Shigeoka, H. NBER Return to Text India,” Das J, Holla A, Mohpal A, February 2017. 41 “Improving the Quality of Choices Geruso M, McGuire T. NBER Working Paper 19726, December 59 “Adult Mortality Five Years after Muralidharan K. NBER Working Return to Text in Health Insurance Markets,” Abaluck Working Paper 20359, July 2014. 2013. a Natural Disaster: Evidence from Paper 21405, July 2015. 32 “Pharmaceutical Profits and the J, Gruber J. NBER Working Paper Return to Text Return to Text the Indian Ocean Tsunami,” Ho J, Return to Text Social Value of Innovation,” Dranove 22917, December 2016. 48 “Upcoding: Evidence from D, Garthwaite C, Hermosilla M. Return to Text Medicare on Squishy Risk NBER Working Paper 20212, June 42 “Do Individuals Make Sensible Adjustment,” Geruso M, Layton T. 2014. Health Insurance Decisions? Evidence NBER Working Paper 21222, May Return to Text from a Menu with Dominated 2015. 33 “Missing Novelty in Drug Options,” Bhargava S, Loewenstein Return to Text Development,” Krieger J, Li D, G, Sydnor J. NBER Working Paper 49 “Information Frictions and Adverse Papanikolaou D. NBER Working 21160, May 2015. Selection: Policy Interventions in Paper 24595 May 2018. Return to Text Health Insurance Markets,” Handel Return to Text 43 “Dominated Options in Health B, Kolstad J, Spinnewijn J. NBER 34 “Public R&D Investments and Insurance Plans,” Liu C, Sydnor J. Working Paper 21759, November Private-Sector Patenting: Evidence NBER Working Paper 24392, March 2015. from NIH Funding Rules,” Azoulay P, 2018. Return to Text Graff Zivin J, Li D, Sampat B. NBER Return to Text 50 “Education and Health: Insights Working Paper 20889, January 2015. 44 “The Role of Behavioral Frictions from International Comparisons,” Return to Text in Health Insurance Marketplace Cutler D, Lleras-Muney A. NBER 35 “How Do Patents Affect Follow-On Enrollment and Risk: Evidence from Working Paper 17738, January 2012. Innovation? Evidence from the Human a Field Experiment,” Domurat R, Return to Text Genome,” Sampat B, Williams H. Menashe I, Yin W. NBER Working 51 “Why is Infant Mortality Higher NBER Working Paper 21666, October Paper 26153, August 2019. in the US than in Europe?” Chen A, 2015. Return to Text Oster E, Williams H. NBER Working Return to Text 45 “Reclassification Risk in the Small Paper 20525, September 2014. 36 “Do Firms Underinvest in Long- Group Health Insurance Market,” Return to Text Term Research? Evidence from Cancer Fleitas S, Gowrisankaran G, Lo Sasso 52 “Mortality Inequality in Canada Clinical Trials,” Budish E, Roin B, A. NBER Working Paper 24663, May and the US: Divergent or Convergent Williams H. NBER Working Paper 2018. Trends?” Baker M, Currie J, Schwandt 19430, September 2013. Return to Text H. NBER Working Paper 23514, June Return to Text 46 “Insurers’ Response to Selection 2017. 37 “The Landscape of US Generic Risk: Evidence from Medicare Return to Text Prescription Drug Markets, 2004– Enrollment Reforms” Decarolis F, 53 “Pauvreté, Egalité, Mortalité: 2016,” Berndt E, Conti R, Murphy Guglielmo A. NBER Working Paper Mortality (In)equality in France and S. NBER Working Paper 23640, July 22876, December 2016. the United States,” Currie J, Schwandt 2017. Return to Text H, Thuilliez J. NBER Working Paper Return to Text 47 “Reinsurance, Repayments, and 24623, May 2018. 38 “The Price to Consumers of Risk Adjustment in Individual Health Return to Text Generic Pharmaceuticals: Beyond the Insurance: Germany, The Netherlands, 54 “The Opportunities and Headlines,” Frank R, Hicks A, Berndt and the US Marketplaces,” McGuire Limitations of Monopsony Power in

8 NBER Reporter • No. 4, December 2019 NBER Reporter • No. 4, December 2019 9 able mergers and acquisi- of a barrier to entry or an antitrust action. Research Summaries Change in Market Concentration Ratio Aer-Tax Corporate Profits as a Percent of Value Added tions and spend more on The French telecom industry, for instance, lobbying.5 Excess profits 10 12% was an oligopoly with three legacy carri- are no longer competed ers that lobbied hard to prevent entry. The 8 away by free entry and the oligopoly lost in 2011, a fourth operator The Economics and Politics 10 Non-manufacturing turnover of industry lead- obtained a license, and prices decreased by 50 of Market Concentration 6 ers has declined.6 percent within two years. 8 4 These results are surprising. Europe, with The Political its tradition of protecting national champi- Manufacturing 6 Thomas Philippon 2 Economy of ons, is not the place where we would have expected competition to thrive. The United 0 4 Concentration Business concentration and profit mar- it hard for inefficient pro- 1982 1987 1992 1997 2002 2007 2012 1970 1974 1978 1982 1986 1990 1994 1998 2002 2006 2010 2014 States, with its tradition of free markets, is gins have increased across most industries ducers to survive, force If “bad” concentra- not the place where we would have expected in the United States over the past 20 years. them to merge or exit, Source: Researchers’ calculations using data from the US Economic Census Source: Researchers’ calculations using data from the Federal Reserve Bank of St. Louis tion has become preva- competition to stall. How then can we Figure 1 illustrates these trends together and lead to higher con- lent, we need to under- explain these evolutions? with the declines of the labor share and pri- centration. Increasing stand why. What are the The theoretical explanation for Europe vate investment. The ratio of after-tax cor- productivity differences Employee Compensation as a Percent of Gross Value Added Net Investment as a Percent of Net Operating Surplus barriers to entry? What is actually relatively simple. When the insti- porate profits to value added has risen from among firms — often 68% 6% is the role of policy ver- tutions of the EU’s Single Market were an average of 7 percent from 1970 through embedded in intangible sus technology? It is dif- designed in the early 1990s, there was sig- 2002 to an average of 10 percent in the assets — can play a similar 66 5 ficult to obtain a convinc- nificant suspicion among member states that period since 2002. Firms used to reinvest role. If these explanations 64 4 ing answer by looking each would try to impose its domestic agenda about 30 cents of each dollar of profit. Now are correct, the remain- 62 3 only at the United States, on the common regulators. Gutiérrez and I they only invest 20 cents on the dollar. ing firms in the market but the comparison with show that the Nash equilibrium of the reg- should be the most pro- 60 2 other regions — Europe ulatory-design game plays out differently at 7 Good versus Bad Concentration ductive and concentra- 58 1 in particular — is quite the national and EU levels. At the national tion should go hand in illuminating. Until the level, politicians enjoy being able to influence 56 0 A crucial research question is whether hand with strong produc- 1970 1974 1978 1982 1986 1990 1994 1998 2002 2006 2010 2014 1970 1974 1978 1982 1986 1990 1994 1998 2002 2006 2010 2014 1990s, US markets were regulators. At the EU level, however, they are these trends reflect market power and rent tivity growth and intan- more competitive than mostly worried about influences from other seeking or more benign factors, such as a gible investment. Source: Researchers’ calculations using data from the Federal Reserve Bank of St. Louis Source: Researchers’ calculations using data from the Federal Reserve Bank of St. Louis European markets. Today, countries. As a result, the member states shift toward intangible assets with returns- Concentration and however, many European jointly decided to make EU institutions more Figure 1 to-scale effects. The main difficulty is that competition are nega- markets have lower excess fiercely independent than they would have the relationship between concentration and tively related when shocks to entry costs should be negatively related to productivity and e-commerce reflects efficiency gains in profits and lower regulatory barriers to entry. done at the national level. This is how Europe competition is ambiguous. play a dominant role in the data. This can and investment. the retail industry.1 The wholesale trade Two US industries in particular exemplify ended up with the most independent central Concentration and competition are result from changes in antitrust enforce- Some industries fit the efficient -con sector also seems to fit this pattern. The the evolution of concentration and markups bank as well as the most independent anti- positively related when shocks to ex post ment, barriers to entry, or the threat of centration hypothesis, while others fit the telecom industry, on the other hand, fits over time: telecoms and airlines. trust agency in the world. Over the following competition play a dominant role in the predatory behavior by incumbents. If these rent-seeking one. Ali Hortaçsu and Chad the rent-seeking pattern rather well. It has Twenty years ago, access to the internet 20 years, the logic of the single market has data. For example, lower search costs make explanations are correct, concentration Syverson argue that the rise of superstores become increasingly concentrated, and was cheaper in the US than in Europe. In slowly pushed Europe toward freer and more Germán Gutiérrez and I show that US con- 2018, however, the average monthly cost of competitive markets. sumers today pay twice as much for cell fixed broadband in the US was twice as high Understanding how US markets became Thomas Philippon is the Max L. Heine Professor of Finance at New York University’s Stern School of Business. Philippon was named phone and broadband internet services as as in France or Germany. Air transportation less competitive is more complicated. There one of the top 25 economists under 45 by the International Monetary Fund in 2014. He has won the 2013 Bernácer Prize for Best European citizens in nearly all other developed coun- is another industry in which the US has fallen are many possible explanations. Some con- Economist under 40, the 2010 Michael Brennan & BlackRock Award, the 2009 Best Young Economist of tries.2 Some high-tech sectors combine fea- behind. The rise in concentration and prof- centration has been driven at least in part France Award, and the 2008 Brattle Group Prize for the best paper in corporate finance. tures of the two types of concentration. its aligns closely with a controversial merger by increasing returns to intangible assets, Philippon has studied various topics in macroeconomics and finance: systemic risk, crisis resolution One reason, as Nicolas Crouzet and Janice wave that included the merging of Delta and as Crouzet and Eberly explain.8 The cru- mechanisms, the dynamics of corporate investment and household debt, and the size of the finance indus- Eberly argue, is that intangible capital gen- Northwest in 2008, United and Continental cial test lies in the relationship between pro- try. His recent work has focused on the Eurozone crisis, financial regulation, and the market power of large erates high returns and high rents at the in 2010, Southwest and AirTran in 2011, ductivity growth and concentration. Matias firms. He is affiliated with the NBER programs in Economic Fluctuations and Growth, Asset Pricing, and same time.3 and American and US Airways in 2014. In Covarrubias, Gutiérrez, and I find a pos- Corporate Finance Over the past 20 years, however, nega- Europe, over the same period, the growth of itive correlation between changes in con- Philippon currently serves as an academic adviser to the Financial Stability Board and to the Hong tive concentration has become relatively low-cost carriers has driven competition up centration and productivity growth in the Kong Institute for Monetary and Financial Research, and was previously an adviser to the Federal Reserve more prevalent in the United States.4 Recent and prices down. 1990s. This suggests that concentration was Bank of New York, a board member of the French prudential regulatory authority from 2014 to 2019, and increases in concentration have been associ- European industries did not become either benign or that it was the price to pay the senior economic adviser to the French finance minister in 2012–13. ated with weak productivity growth and cheaper and more competitive by chance. In to achieve greater efficiency. The correla- He graduated from École Polytechnique, received a PhD in Economics from MIT, and joined New declining investment rates. Firms in con- all the cases that I have studied, there was a tion became negative in the 2000s, however, York University in 2003. centrating industries engage in more profit- significant policy action, such as the removal suggesting a higher prevalence of rent seek-

10 NBER Reporter • No. 4, December 2019 NBER Reporter • No. 4, December2019 11 ing. Unfortunately, this is where the lack during the 2000s is the rise in business Study of Institutional Drift,” Gutiérrez Interbank Network Risk, of data on firm-level prices and difficul- lobbying and campaign finance contribu- G, Philippon T. NBER Working Paper ties in making adjustments for labor qual- tions. Lobbying and regulation can explain 24700, June 2019. See also: “Political Regulation, and Financial Crises ity create empirical challenges. There are the failure of free entry if incumbents use Determinants of Competition in also tricky econometric issues when we them to alter the playing field. Incumbents the Mobile Telecommunication use granular data to test this relationship. may, for example, influence antitrust and Industry,” Faccio M, Zingales L. CEPR. Matthew S. Jaremski A fair assessment is that we do not know merger enforcement as well as regulations, Discussion Papers, No. 11794, for sure. ranging from the length and scope of pat- January 2017. The financial crisis of 2008–09 intensified ity. This structure facilitates the identification Two trends that are specific to the ents and copyright protection to finan- Return to Text interest in how relationships within the finan- of the effects of shocks to individual banks US in the 2000s help us to shed light on cial regulation, non-compete agreements, 3 “Rents and Intangibles: A Q+ cial system can amplify and transmit shocks. At from other simultaneous macroeconomic fac- the issue. One is what Gutiérrez and I call occupational licensing, and tax loopholes. Framework,” Crouzet N, Eberly J. a basic level, firms took advantage of rising real tors. Second, the financial statements of each the failure of free entry.9 When profits Consistent with these ideas, we find that Kellogg School of Management, estate prices by scaling up lending and leverage, bank were publicly available, and publications increase in an industry, new firms should the elasticity of firm entry to Tobin’s q Working Paper, October 2019. Matthew S. Jaremski is a which fueled further increases in asset prices. often listed each bank’s specific interbank enter. When profits Return to Text research associate in the NBER’s When asset price growth slowed, problems at correspondent connections. The historical shrink, existing firms 4 Development of the American individual financial institutions suggested prob- period, therefore, is the only time when a full Elasticity of Net Entry to Tobin’s q Across Industries The Great Reversal: should exit or consoli- How America Economy Program and an associ- lems at other firms and triggered a reduced abil- picture of the nation’s interbank network can date. Economic theory ate professor in the Department ity to borrow for many firms, whether or not be studied without confidential data. Third, 1.5% Gave Up on Free predicts higher entry in Markets, Philippon of Economics and Finance of they were contractually connected to the mort- there was a great deal of regulatory variation industries with higher 1.2 T. Cambridge, MA; the Jon M. Huntsman School of gage credit shock. For example, in September within the country’s unified legal and mone- market-to-book values, Harvard University Business at Utah State University. 2008, the inability of the Reserve Primary Fund tary system. Each state had regulatory control also known as Tobin’s 0.9 Press, 2019. His research explores the inter- to maintain a constant $1 per share price led over its state-chartered banks, while national q. Intuitively, Tobin’s Return to Text section of financial economics to runs on other money market mutual funds, banks chartered by the Comptroller of the q measures expected 0.6 5 “Are U.S. Industries and economic history. Topics including many that had little or no direct Currency faced a common set of regulations profits (valued by the 0.3 Becoming More include the effects of interbank exposure to Lehman Brothers or the Reserve throughout the country. This feature allows market) per unit of Concentrated?” networks on financial insta- Primary Fund. Moreover, as the interbank lend- the study of banks that are in the same loca- entry costs (book val- 0.0 Grullon G, Larkin bility, the role of regulation in ing market collapsed, banks scrambled to hoard tion and during the same year, but subject to ues). We study whether Y, Michaely R. bank outcomes, the connection reserves as a means of self-insurance against different sets of regulations. As highlighted the number of firms -0.3 Forthcoming, Review between financial development prospective liquidity needs, further aggravating below, the historical environment sheds light increases in industries of Finance. and economic growth, and the declines in asset prices and lending. not only on the factors that lead to financial where Tobin’s q is high -0.6 Return to Text determinants and consequences Despite the importance of modern finan- panics, but also on how interbank dynamics and decreases in indus- 1971 1975 1979 1983 1987 1991 1995 1999 2003 2007 2011 2015 6 “From Good to of financial crises. A unifying cial markets, their complexity makes it hard play out during panics. tries where it is low. Bad Concentration? theme is using unique historical to study the effects of asset price shocks or Figure 2 shows that Source: Researchers’ calculations using data from Compustat U.S. Industries variation to study dynamics that how they are transmitted and amplified across Commodity Shocks and Regulation free entry was alive and Over the Past 30 are obscured or hard to isolate in firms and markets. For instance, information well from the 1960s Figure 2 Years,” Covarrubias modern data. about a bank’s interconnections with other As in 2008–09, asset price booms and busts to the late 1990s. The positive elasticity has decreased more in industries that have M, Gutiérrez G, Philippon T. NBER Jaremski received a BA in lenders — its “counter-party positions” — is historically were often intertwined with lending implies that, when the industry-median experienced larger increases in lobbying Working Paper 25983, September economics, classical civilizations, often closely held and accessible to only a booms and busts. Rising asset prices can stimu- Tobin’s q increased, more firms would and regulations. 2019. and business administration handful of researchers at regulatory agencies. late lending and increased leverage, which in enter the industry. Specifically, an increase The failure of free entry has negative Return to Text from Austin College in 2006 Further, with many banks having international turn cause asset prices to rise further. Similarly, in Tobin’s q of one unit, as from 1 to 2, implications for productivity, equality, and 7 “How EU Markets Became More and his PhD in economics from branches and engaged in a wide variety of off- falling asset prices can force debt contraction coincided with an increase in the number welfare in general. If capital gets stuck in Competitive Than US Markets: A Vanderbilt University in 2010. balance-sheet activities, it is difficult to dis- and deleveraging that reinforce the decline in of firms in the industry of about 10 percent declining industries and does not move to Study of Institutional Drift,” Gutiérrez Before joining Utah State, he was tinguish the effect of a single shock or policy asset prices. The interrelationship between asset over the next two years. Consistent with promising ones, the economy suffers: pro- G, Philippon T. NBER Working Paper an associate professor at Colgate from other concurrent factors. prices and lending booms thus raises impor- free entry, firms used to enter into high q ductivity growth is weak, wages stagnate, 24700, June 2019. University and has held visiting My research uses the lens of history tant questions, including how various regula- industries and exit from low q ones. and standards of living fail to improve. Return to Text positions at Yale University and for insight into these dynamics. US finan- tions and policies affect the vulnerability of the But this is no longer the case. The elas- 8 “Rents and Intangibles: A Q+ the Office of Financial Research cial history is advantageous for a variety of banking system to asset price shocks, and how ticity has been close to zero since 2000. A Framework,” Crouzet N, Eberly J. at the US Treasury. reasons. First, as most states prohibited or bank lending and instability can exacerbate fundamental rebalancing mechanism that 1 “The Ongoing Evolution of US Kellogg School of Management, He grew up in Dallas, Texas severely restricted interstate bank branching, asset price movements. I have sought to use the was at the heart of the Chicago School Retail: A Formal Tug of War,” Hortaçsu Working Paper, October 2019. and currently lives in Logan, the financial statements of individual banks unique variations in the historical environment argument for not worrying about market A, Syverson C. Journal of Economic Return to Text Utah, with his wife. They enjoy reflect their lending to local customers. This to examine the roles that lending and regulation dominance by a few large firms seems to Perspectives, 29(4), 2015, pp. 89–112. 9 “The Failure of Free Entry,” Gutiérrez hiking and swimming during the creates a large sample of banks to study, each play in boom-bust events. have broken down. If free entry fails, the Return to Text G, Philippon T. NBER Working Paper summer, and board games and of which operates in a distinct economic envi- David Wheelock and I examine bank laissez-faire argument fails. 2 “How EU Markets Became More 26001, June 2019. movies during the winter. ronment. Moreover, historically, few banks lending in the boom-bust cycle affecting US The other striking trend in the US Competitive Than US Markets: A Return to Text engaged in significant off-balance-sheet activ- agricultural land prices during and after World

12 NBER Reporter • No. 4, December 2019 NBER Reporter • No. 4, December 2019 13 War I.1 The wartime collapse of European tion of deposit insurance, even compared financial history. ing panics, and in so doing weakened the Our analysis indicates that the cessation can lead to and exacerbate instability. However, agriculture drove commodity prices sharply to nearby states. Insured banks as a result My work with Wheelock finds that the incentives for banks to guard against inter- of the largely exogenous gold inflows is the the structure of the networks is often shaped by higher and, for the United States, con- increased their loans as well as reduced network at the end of the 19th century was bank liquidity risk. only factor that can explain the sudden decline the regulatory and economic environment sur- stituted an external demand shock that their cash and capital buffers. Loans pyramidal in structure, with a small number Knowing that banks had reduced their in excess reserves in early 1941. Between the rounding the banks. Insights from studies of sparked a boom in farmland prices. increased most strongly in insured banks of banks serving as correspondents for a high buffers against interbank liquidity risk, we go trough of the Great Depression in 1933 and the Great Depression and other stress episodes However, European production bounced located in counties where the World War I percentage of the nation’s banks.3 The net- on to investigate the role of interbank con- the end of World War II, excess reserves fell where interbank connections are known, there- back quickly when the war ended, driving price rises had the biggest effect, suggesting work became less concentrated after the estab- nections in transmitting fore, can help in the design down US crop prices and initiating a wave that deposit insurance might have its most lishment of the Federal Reserve System in shocks during the Great Formation of the Federal Reserve System and Banking Decentralization of better policies to contain of farm foreclosures and bank failures in negative consequences when investment 1914, as banks shifted their interbank relation- Depression. Specifically, the spillovers associated with the early 1920s. Using a county-specific opportunities are plentiful. ships away from New York City and toward we examine the effects of Increase in city’s role as banking-network hub, 1910–1919 counterparty exposures. measure of farm output banks in Fed cities within contagion through direct 1 prices, we show that ris- Adoption of State-Level Bank Deposit Insurance their local district. As seen contractual obligations “Banking on the Boom, ing crop prices encour- in Figure 2, Federal Reserve between individual banks. Tripped by the Bust: Banks aged entry of new banks Ratio of state to national bank deposits, normalized to 1 in 1900 Bank and branch cities gen- Controlling for balance and the World War I and balance sheet expan- 1.7 erally had the largest increases sheet characteristics com- Agricultural Price Shock,” 1.6 Year states’ deposit sion of new and previ- insurance took eect OK TX, KS NE in eigenvector centrality (the monly associated with the Jaremski M, Wheelock 1.5 Larger circles represent a ously established banks. influence nodes have on net- probability of failure, a greater rise in bank-network D. NBER Working connections. The less-regulated, state- 1.4 Deposit-insurance states works) in 1910–19. Fitting bank’s probability of clos- Paper 25159, June 2019. chartered banks, as well as 1.3 with my previous study on ing during the Depression Federal Reserve Bank Forthcoming in Journal of Federal Reserve branch those established during 1.2 New York with Calomiris, was higher when a higher Money, Credit, and Banking. the war, were especially Haelim Anderson, and percentage of its connected City with neither Return to Text aggressive lenders and 1.1 Gary Richardson, Fed mem- banks closed. Closures in 2 “Stealing Deposits: 1.0 much more likely to close Non-deposit-insurance states ber banks located in Fed cit- one area spread to other Deposit Insurance, Risk- 0.9 when the bust occurred. ies across the country were areas through interbank The Federal Reserve System was established in December 1913 Taking and the Removal Source: Researchers’ calculations using digitized data from the Rand McNally Bankers’ Directory Moreover, deposit insur- 0.8 especially favored as corre- connections even when the of Market Discipline in ance amplified the delete- 1900 1905 1910 1915 1920 1925 spondents because of their specific connected bank Early 20th Century Banks,” rious effects of rising crop unique access to the Fed’s did not ultimately close. Figure 2 Calomiris C, Jaremski M. Source: Researchers’ calculations using data from All Bank Statistics and a prices, whereas higher prioprietary database of digitized state bank data from the period 1900–1920 liquidity and payments ser- Our results indicate, therefore, that conta- in only two periods. The first and only tem- NBER Working Paper 22692, September capital requirements vices, which they were able to gion through network ties was a significant porary decline in early-to-mid 1937 occurred 2016, and Journal of Finance 74(2), April 2019, 4 dampened them. We also Figure 1 pass through to other banks. source of banking instability during the Great when gold inflows slowed after the gold pp. 711–54. Return to Text find that bank closures exacerbated the col- Thus, the Fed’s founding changed the rela- Depression. bloc countries devalued and the Fed raised 3 “The Founding of the Federal Reserve, the lapse of farmland values during 1920–25. Interbank Structure and Risk tive attractiveness of correspondents in dif- reserve requirements. Excess reserves quickly Great Depression and the Evolution of the U.S. Thus, our research provides new evidence ferent locations. This reduced network con- Unwinding Quantitative Easing rebounded, however, during the recession of Interbank Network,” Jaremski M, Wheelock of how banks can both be affected by and The interconnected nature of financial centration meant that the risk of contagion 1937–38. The second and more permanent D. NBER Working Paper 26034, July 2019. contribute to asset price booms and busts, networks can propagate shocks, increase sys- emanating from a crisis hitting a core city was While most studies have focused on the decline in excess reserves started in early 1941 Forthcoming in Journal of Economic History. and how banking policies can influence the temic risk, and magnify economic down- lessened, but the system remained vulnerable actions of the Fed during the most recent and corresponded to the cessation of gold Return to Text feedback loop around such events. turns. Insights from theoretical studies sug- to local and regional panics, and ultimately downturn, the Great Depression offers insight flows from Europe during the war. Excess 4 “Liquidity Risk, Bank Networks, and the Charles Calomiris and I closely exam- gest that the tendency of interbank networks depended on the Fed to prevent them from on how to unwind the substantial excess reserves were on track to have unwound fully, Value of Joining the Federal Reserve System,” ine the effects of deposit insurance.2 Our to amplify shocks reflects the relative size of spreading across the banking system. reserves that built up as a result of quantita- even without the issuance of war bonds or an Calomiris C, Jaremski M, Park H, Richardson findings not only corroborate prior litera- network members, the extent of intercon- While the Fed’s establishment may have tive easing (QE). Just as in 2007–10, short- increase in reserve requirements in late 1941. G. NBER Working Paper 21684, October ture on the moral-hazard consequences nections between them, and the magnitude reduced the concentration of interbank rela- term interest rates quickly hit the zero lower Therefore, policy tightening was unnecessary. 2015, and Journal of Money, Credit and of deposit insurance, but also show how of shocks hitting the system, whereas the sys- tionships in certain areas, our follow-up work bound in the early 1930s and nontraditional Instead, by allowing funds to disperse naturally Banking 50(1), February 2018, pp. 173–201. the introduction of deposit insurance cre- temic risk posed by individual institutions with Calomiris shows that it might also have monetary policies were considered to stimu- after the gold inflows had ceased, the Fed pre- Return to Text ated systemic risk. We find that deposit depends on heterogeneity in network struc- led individual banks to become complacent late the economy. The net inflows of gold to vented any large spikes in markets and was able 5 “Interbank Connections, Contagion and insurance caused risk to increase by remov- ture and the concentration of counterparty about liquidity risk, and therefore more vul- the United States between May 1934 and to slowly unwind its QE program. Bank Distress in the Great Depression,” ing the market discipline that had been exposures. Although studies suggest that net- nerable to liquidity shocks.5 Before the Fed December 1941 were more than $14.5 billion, To conclude, history not only plays a key Calomiris C, Jaremski M, Wheelock D. constraining uninsured banks’ decision- work structure affects systemic risk, the lack was established, greater exposure to inter- and while gold inflows were not directly con- role in shaping the institutions and markets that NBER Working Paper 25897, May 2019. making. Depositors applied strict market of comprehensive interbank information has bank deposits encouraged banks to increase trolled by the Fed, the decision not to sterilize exist today, but also enables the study of impor- Return to Text discipline on uninsured national banks, prevented much empirical work on how net- their capital ratios. By contrast, the amount gold inflows led to an enormous increase in tant dynamics that are sometimes obscured in 6 “How was the Quantitative Easing Program but supplied funds to insured state banks works evolve and how banks handle inter- of interbank deposits had much less impact the monetary base. While we have not yet seen modern data. Recent research, for instance, has of the 1930s Unwound?” Jaremski M, Mathy without requiring those banks to maintain bank shocks. Using data on the entire US on risk-management decisions after the Fed’s the full unwinding of the current QE program, highlighted the relationships between inter- G. NBER Working Paper 23788, September financially sound balance sheets. Figure 1 interbank network in the early 1900s, I have founding. In essence, the Fed provided a per- my work with Gabriel Mathy studies how the bank networks, regulation, and financial cri- 2017, and Explorations in Economic History 69, shows that the ratio of state bank deposits begun to study how the network evolved and ception of liquidity risk insurance against the United States unwound the monetary expan- ses. The literature shows that the concentra- July 2018, pp. 27–49. to national bank deposits grew after adop- functioned over an important period in US sorts of shocks associated with previous bank- sion of the Great Depression.6 tion of interbank funds in a few institutions Return to Text

14 NBER Reporter • No. 4, December 2019 NBER Reporter • No. 4, December 2019 15 Economics and Behavioral Health governments have adopted a in Medicaid, and pro- range of policies to address Suicide Rates, 1999–2017 viders were able to the opioid epidemic: pre- accept that insurance Deaths per 100,000 Johanna Catherine Maclean scription drug monitoring 25 as a form of payment. programs, shutdowns of Our effect sizes are Behavioral health disorders include seri- epidemic has been largely attributable to “pill mills,” a crackdown on 22.4 quite large, suggest- ous mental illness and substance use dis- opioids. There are 130 opioid-related over- doctor-shopping, syringe 20 Men ing that when new orders. These conditions are costly both dose deaths each day, a rate that has increased exchanges, and funds to 17.8 forms of financing to affected individuals and to society. more than sixfold since 1999.4 The opioid support treatment. 15 are available, patients 14.0 Individuals with behavioral health disorders epidemic is believed to have begun in the At the same time as the Men and Women and providers are elas-

experience interpersonal problems, employ- 1990s and 2000s through overprescription country is facing social costs 10 10.5 tic in their responses. ment difficulties, reduced overall health, and of opioids for the treatment of pain. It has from escalating drug mis- We do not observe

increased risk of death. Behavioral health dis- evolved over time to involve heroin and syn- use, government data sug- 6.1 changes in admis- 5 5 Women Johanna Catherine Maclean orders can complicate general health treat- thetic opioids. Abby Alpert, David Powell, gest that suicide rates are 4.0 sions; we hypothe- is an associate professor in ment. These conditions are costly to society and Rosalie Pacula, along with William also increasing. The overall size that capacity con- the Economics Department because they place demands on the criminal Evans, Ethan Lieber, and Patrick Power, have rate and rates for men and 0 straints within the at Temple University. She is justice, social service, and health-care sys- documented that an unexpected, to consum- women from 1999 through 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 SUD treatment deliv- an NBER research associ- tems, and because they reduce labor market ers, reformulation of OxyContin in 2010, 2017 are shown in Figure 2. ery system may have ate affiliated with the Health productivity. Behavioral health conditions which limited the ability to abuse this then- While behavioral health Source: Mortality data from the National Vital Statistics System, National Center for Health Statistics stifled effects in the Economics Program. She is cost the US economy more than $1 trillion most commonly used prescription opioid, led disorders generally cannot short run, as we exam- also a research affiliate at the each year.1,2 The causes of these disorders are many users to transition to heroin and, more be cured, there is substantial Figure 2 ine the situation two Institute for Labor Economics. complex, and likely include both genetic and recently, to fentanyl and other synthetic opi- medical evidence that these makes the extent to which expanding years post-expansion. Her work focuses on behavioral environmental factors. oids.6 7 Synthetic opioids are less expensive disorders can be managed. This con- insurance leads to changes in outcomes is In continuing research, we are explor- health and health care, tobacco Behavioral health disorders are relatively to manufacture but are more potent than her- fluence of factors creates an important an empirical question. ing the longer-run effects, using data products, insurance, and public common. The most recent government data oin and prescription opioids. Figure 1 docu- potential role for public policy, which from four years post-expansion, and we policies and economic factors suggest that, in 2017, 4.2 percent of all US ments trends in annual overdoses associated can provide insurance coverage that is Evidence from Public Markets observe increases in admissions, which related to these outcomes. adults — 11.2 million people — met diagnos- with any opioid, heroin, and synthetic opi- sufficiently generous, in terms of covered is in line with our hypothesis. When we Maclean is a co-editor at tic criteria for serious mental illness, and 7.2 oids (other than methadone, which is a medi- benefits, to allow appropriate treatment. Medicaid, which finances health-care consider prescriptions for medications the Journal of Policy Analysis percent — 19.2 million people — had sub- cation used to treat opioid use disorder). The In a series of studies, my colleagues and services for low-income people, is the financed by Medicaid used to treat SUDs and Management. She com- stance abuse disorders. Approximately 1 per- sharp uptick in the later period is ascribed to I explore how insurance expansions can largest purchaser of US behavioral health in office-based settings, a setting gen- 8 pleted her PhD at Cornell cent — 3.1 million Americans — met criteria fentanyl in particular. Federal, state, and local influence behavioral health-care service care. Brendan Saloner and I examine erally preferred by patients, we observe University in 2012 after earn- for both disorders.3 use and associated outcomes. To study the effect of Affordable Care Act (ACA) large increases in treatment uptake. ing Bachelor’s and Master’s A much larger share these questions, we combine insight Medicaid expansions on SUD treat- In terms of serious mental illness, degrees at Dalhousie University of the population Fatal Opioid Overdoses, 1999–2017 from health economics with clinical ment, specialty treatment, and medica- Michael Pesko, Benjamin Cook, Nicholas in Canada. She has pub- engages in misuse of knowledge of behavioral health dis- tions obtained in non-specialty settings Carson, and I show that ACA-Medicaid Deaths per 100,000 9 lished over 50 articles in peer- substances through 15 orders. Both are important for study- such as physicians’ offices. Medicaid- expansions increase use of prescriptions reviewed journals, including the activities such as 14.9 ing these questions. We rely heavily enrolled adults have elevated need for used to treat mental illness in office- Journal of Health Economics, binge drinking and on survey and administrative datas- behavioral health-care treatment and are based settings.11 Similarly, Elson Blunt, the Journal of Policy Analysis recreational use of 12 All opioids ets maintained by the US government less likely to receive this modality of Ioana Popovici, Steven Marcus, and I and Management, The Journal drugs, or experi- specifically to track behavioral health care than privately and Medicare-insured use data on the universe of specialty 9 of Law & Economics, American ences episodes of 9.0 outcomes. adults. The ACA reflects a major trans- mental health-care providers to study Journal of Health Economics, poor mental health An important feature of the formation of many areas of the health- ACA-Medicaid effects.12 We show that

Health Economics, Industrial such as mild depres- 6 Synthetic opioids behavioral health-care delivery sys- care system. Pre-ACA, experts asserted following ACA-Medicaid expansion spe- and Labor Relations Review, sion or anxiety. (non-methadone) tem, in particular the substance use that “no illness will be more affected cialty providers are more likely to accept 4.9 Labour Economics, IZA Journal The United States disorder (SUD) system, is limited use than substance use disorders.”10 We find Medicaid as a form of payment, sug- 3 of Labor Policy, Industrial is in the midst of 2.9 Heroin of insurance payments. Many pro- that ACA-Medicaid expansion increased gesting that this expansion is making Relations, Health Affairs, and an unprecedented viders operate outside insurance pay- Medicaid coverage among patients receiv- new treatment options available to lower- 0.7 others. Her work has been sup- drug-use epidemic. 0 0.3 ments, for example, accepting self-pay- ing specialty care, and use of Medicaid income adults. ported by the National Institutes In 2017, 70,237 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 ments or relying on government grants to pay for treatment. Given the limited Sebastian Tello-Trillo, Douglas of Health, the Food and Drug US residents are and contracts to support treatment. use of insurance within the SUD treat- Webber, and I examine the effect of los- Administration, the American known to have died Source: Mortality data from the National Vital Statistics System, National Center for Health Statistics Combining this feature with unique ment delivery system, this latter find- ing public insurance on hospitalizations Cancer Society, and the Robert from a drug over- challenges faced by those with behav- ing is important; ACA-Medicaid allowed for behavioral health-care outcomes.13 Wood Johnson Foundation. dose. The drug-use Figure 1 ioral health disorders, such as stigma, low-income adults with SUDs to enroll We exploit a large-scale and unexpected

16 NBER Reporter • No. 4, December 2019 NBER Reporter • No. 4, December2019 17 Medicaid disenrollment that occurred ior.15 We show that following passage ACA. Both reforms aimed to achieve Statistics and Quality, Substance 9 “The Effect of Public Insurance 14 “Losing Public Health Insurance: in the state of Tennessee in 2005 of a parity law, SUD treatment pro- universal insurance through expansions Abuse and Mental Health Services Expansions on Substance Use TennCare Disenrollment and Personal (TennCare). This disenrollment led to viders are more likely to accept pri- of public and private coverage. Saloner Administration, Rockville, MD, 2018. Disorder Treatment: Evidence from Financial Distress,” Argys L, Friedson 190,000 low-income adults losing cov- vate coverage and less likely to accept and I leverage the Massachusetts expe- Return to Text the Affordable Care Act,” Maclean J, A, Pitts M, Tello-Trillo S. Federal erage that had included a generous set public coverage, and they increase rience to study how a large-scale insur- 4 “Drug Overdose Deaths in the Saloner B. Journal of Policy Analysis Reserve Bank of Atlanta Working of behavioral health-care services. We the quantity of health care delivered. ance expansion in both the public and United States, 1999–2017,” Hedegaard and Management 38(2), Spring 2019, Paper Series. Federal Reserve Bank of show that losing TennCare reduced the Provision of charity care declines post- private markets might influence spe- H, Miniño A, Warner M. NCHS Data pp. 366–393. Atlanta, 2017. number of SUD-related hospitaliza- parity law; we hypothesize that substi- cialty SUD treatment.18 Massachusetts Brief 329, November 2018, National Return to Text Return to Text tions, while the number of mental ill- tution effects — treating higher reim- compelled private insurers to provide Center for Health Statistics. 10 “The Affordable Care Act and 15 “Health Insurance Expansions and ness hospitalizations was unchanged. bursement-rate patients — crowds out a relatively generous set of SUD treat- Return to Text Treatment for ‘Substance Use Providers’ Behavior: Evidence from Patients with mental illness were able care provided for free. Michael French, ment services, and Medicaid covered 5 Vietnam War Casualties (1955– Disorders:’ Implications of Ending Substance-Use-Disorder Treatment to replace Medicaid with private and Popovici, and I consider the effects these services. We find no evidence 1975). Military Factory, 2019. Segregated Behavioral Health Care,” Providers,” Maclean J, Popovici I, Stern Medicare coverage, while patients of parity law passage on a more dis- that this reform led to changes in the Return to Text McLellan A, Woodworth A. Journal E. Journal of Law & Economics 61(2), with SUDs were not able to fill in the tal outcome — substance-involved traf- number of admissions to treatment or 6 “Supply-Side Drug Policy in the of Substance Abuse Treatment 46(5), 2018, pp. 279–310. Medicaid gap and instead had to self- fic fatalities. We show, using a range in the types of payment that providers Presence of Substitutes: Evidence from May-June 2014; pp. 541–545. Return to Text finance hospitalizations after the disen- of administrative datasets, that follow- were willing to accept. Massachusetts is the Introduction of Abuse-Deterrent Return to Text 16 “Health Insurance and Traffic rollment. We hypothesize that patients ing passage of a parity law, SUD treat- unique in that this state had one of the Opioids,” Alpert A, Powell D, Pacula 11 “Public Insurance and Psychotropic Fatalities: The Effects of Substance with SUDs face important social, eco- ment uptake increases, SUDs decline, lowest uninsured rates in the country R, NBER Working Paper 23031, Prescription Medications for Mental Use Disorder Parity Laws,” Popovici I, nomic, and cognitive challenges that and substance-involved traffic fatali- prior to its reform, thus our null find- January 2017, and American Economic Illness,” Maclean J, Cook B, Carson Maclean J, French M. NBER Working limit their ability to find substitute ties drop.16 ings may reflect ceiling effects. Journal: Economic Policy 10(4), J, Pesko M. NBER Working Paper Paper 23388, February 2018. coverage following an insurance loss. An early provision of the ACA, the November 2018, pp. 1–35. 23760, March 2018, and B.E. Journal Return to Text We also show that, post-disenrollment, dependent coverage mandate (DCM) Lessons Learned Return to Text of Economics and Policy Analysis, 17 “Access to Health Insurance behavioral health outcomes decline, implemented in 2010, allowed many 7 “How the Reformulation of 19(1), January 2019. and Utilization of Substance Use plausibly through reduced treatment young adults to remain on their par- Our findings are heterogeneous; OxyContin Ignited the Heroin Return to Text Disorder Treatment: Evidence from for SUDs and other changes, such as ents’ private plan through age 26. The there does not appear to be a “one size Epidemic,” Evans W, Lieber E, Power 12 “Public Insurance Expansions and the Affordable Care Act Dependent increased financial strain, as has been age limit previously was 19. Saloner, fits all” policy for addressing behavioral P. NBER Working Paper 24475, April Mental Healthcare Availability,” Blunt Coverage Provision,” Saloner B, Akosa shown by Laura Argys et al.14 Cook, Yaa Akosa Antwi, and I exam- health issues. The effects of expanding 2018, and Review of Economics and E, Maclean J, Popovici I, Marcus S. Antwi Y, Maclean J, Cook B. Health ine the effect of the DCM on insurance coverage are much more nuanced and Statistics 101(1), March 2019, pp. Working paper in progress. Economics 27(1), January 2017, pp. Evidence from Private Markets coverage, payment forms, and admis- appear to depend on the affected popu- 1–15. Return to Text 50–75. sions within the specialty sector.17 We lation, treatment setting, and outcome. Return to Text 13 “Losing Insurance and Behavioral Return to Text State governments have attempted compare trends in these outcomes for The mixed findings suggest that, while 8 “Behavioral Health in the Medicaid Health Inpatient Care: Evidence from 18 “Substance Use Treatment Provider to increase coverage of behavioral adults aged 20 to 26 to slightly older there is promise in using insurance Program — People, Use, and a large-scale Medicaid Disenrollment,” Behavior and Healthcare Reform: health-care services in private insur- adults unaffected by the DCM. Similar policies to improve behavioral health, Expenditures,” Medicaid and CHIP Maclean J, Tello-Trillo S, Webber D. Evidence from Massachusetts,” Maclean J, ance contracts. Beginning in the 1970s, to ACA-Medicaid, we observe large decision-makers must carefully assess Payment and Access Commission, NBER Working Paper 25936, June Saloner B. Health Economics 27(1), 2018, states have required either that private increases in private coverage and use the context in which a policy change is Washington, DC, June 2015. 2019. pp. 76–101. insurers include a minimum set of SUD of this insurance to pay for treatment being considered. Return to Text Return to Text Return to Text treatment benefits in contracts or that within the target group. Interestingly, the insurer offer a beneficiary the abil- we observe a decline in admissions post- ity to include SUD treatment services. DCM. We hypothesize that the DCM 1 “Societal Burden of Substance Even after adoption of these early man- allows young adults to receive care in Abuse,” Caulkins J, Kasunic A, Lee M. dates, coverage was relatively sparse other, perhaps more desirable, settings International Public Health Journal and insurers could impose cost-sharing such as physicians’ offices, rather than 6(3), 2014, pp. 269–282. and service limitations that were more in the specialty settings that we exam- Return to Text restrictive than those applied to gen- ine. This is potentially important, as 2 “Assessing the Economic Costs eral health-care services. Not until the patients are more likely to remain in of Serious Mental Illness,” Insel T. mid-1990s did states begin to imple- treatment, and therefore better manage American Journal of Psychiatry 165(6), ment legislation that required cover- their chronic condition, in settings that June 2008, pp. 663–665. age of SUD treatment services in pri- they find acceptable. Return to Text vate insurance contracts and equality 3 “Key Substance Use and Mental between SUD and general health care The Massachusetts Experience Health Indicators in the United services (parity laws). States: Results from the 2017 National Popovici, Elisheva Stern, and I The Massachusetts health-care Survey on Drug Use and Health,” study the effects of parity laws on spe- reform of 2006 is viewed by many Bose J, Hedden S, Lipari R, Park- cialty SUD treatment provider behav- policy experts as the blueprint for the Lee E. Center for Behavioral Health

18 NBER Reporter • No. 4, December 2019 NBER Reporter • No. 4, December 2019 19 Household Expectations: channel. That is, about 20 tures information about to 30 percent of the effect Macroeconomic Optimism by Income Level the mean outcome that of income or education each respondent expects, From Neuroscience to Household Finance and Macroeconomics 0.9 on choices such as invest- as well as the uncertainty ing in equities or buying Top income quintile associated with that Camelia M. Kuhnen a home is driven by the 0.6 expectation. We find that fact that higher-SES indi- individuals with lower viduals are more optimis- 0.3 income and education Recent work in neuroscience and neuroeco- tus (SES), form more pessimistic beliefs about tic about macroeconomic levels, facing more precar-

nomics has provided valuable insights into the fac- financial investments and economic opportuni- conditions. The aggregate 0.0 ious financial conditions tors that drive individuals’ formation of expecta- ties and avoid investing in stocks or real estate. implication of this find- or living in counties with tions. These insights can be used by economists to Controlling for participants’ prior beliefs and the ing is that pessimistic mac- higher unemployment, better understand individuals’ beliefs and behav- information they possess regarding investment roeconomic expectations -0.3 report more uncertainty iors. Moreover, aggregate-level implications can options, Miu and I find that lower-SES indi- held by lower-SES indi- Bottom income quintile about their expectations. be drawn from these micro-level findings. viduals update less from high asset payoffs than viduals are part of the rea- −0.6 Drawing on objec- Neuroscientist Brian Knutson and I docu- their higher-SES counterparts, and end up with son these individuals stay 1980 1985 1990 1995 2000 2005 2010 2015 tive measures of uncer- mented an asymmetry in the brain in the pro- more pessimistic beliefs about the quality of these away from risky financial tainty derived from the 1 Shaded regions are NBER-dated recessions cessing of gain and loss information. This dis- assets. As a result, lower-SES individuals are less investments and as a result Source: Das S., Kuhnen C. M., Nagel S., NBER Working Paper 24045 volatility of aggregate covery of asymmetric encoding of positive and likely to invest in these assets, particularly at times accumulate low levels of inflation and national negative outcomes led to a hypothesis that could when, objectively, the assets can be expected to wealth, whereas higher- Figure 1 home price growth, we be tested experimentally in the context of finan- have high payoffs.4 SES individuals hold opti- find that lower-SES indi- Camelia Kuhnen is a cial decision-making. In experiments conducted While lab experiments allow researchers to mistic beliefs and make investments with high macro-level economic expectations, and, all viduals report distributions of expectations professor of finance at the in three countries — the United States, Romania, test hypotheses in controlled environments, there expected returns. Over time, this may lead to else being equal, more uncertain individuals that are more diffuse — “wider” — than the Kenan-Flagler Business and Germany — I have found that learning occurs is always a question about the external valid- an increase in wealth inequality. It remains to engage in more cautious behaviors.7 We use objective distributions. Furthermore, we find School at the University of differently depending on whether gain or loss has ity of lab findings. To investigate whether it is be seen whether the same patterns of differ- data from the Federal Reserve Bank of New that if a person reports more uncertainty North Carolina at Chapel taken place. Specifically, negative outcomes induce generally true that those with lower incomes or ential expectations by SES level, as well as dif- York Survey of Consumer Expectations about one of the three economic variables in Hill. She is an NBER research overly pessimistic beliefs about investment pay- lower education have overly pessimistic beliefs ferential levels of investment because of these (SCE) covering more than 1,200 households the survey, they are also more likely to report associate affiliated with offs.2 This is because, in an environment charac- about financial investment opportunities, as well expectations, also affect investments in edu- each month, 2013 to 2017. Respondents more uncertainty for the other two vari- the Asset Pricing Program, terized by negative payoffs, people put too much as about macroeconomic conditions in general, cation or human capital, or the decision to report their expectations about three vari- ables. This effect, the extrapolation of uncer- and an associate editor at weight on each additional bit of bad news. This Das, Nagel, and I use data from the University engage in entrepreneurial pursuits. ables: their personal income growth, the tainty across domains, is particularly strong The Journal of Finance, The experimental finding suggests that, at the aggre- of Michigan’s Surveys of Consumers (MSC). Adversity does not just impact the lens national inflation rate, and the rate of growth among low-SES individuals. [See Figure 2.] Review of Financial Studies, gate level, recessions could last longer and be more We use monthly data over 38 years with about through which individuals view economic of national home prices over the upcoming We also find that uncertainty in economic Management Science, and severe than predicted by standard models, in part 180,000 person-month observations. The data opportunities in a glass half-full versus glass 12 months. The elicitation procedure cap- expectations influences behavior in ways con- The Review of Corporate because of undue pessimism among individuals. include SES measures (i.e., income rank in half-empty manner. It sistent with prior theo- Finance Studies. She is a past Participants in my experiments were tem- the respondent’s age bracket, as well as educa- also impacts perceived Pairwise Correlation of Uncertainty in Expectations of Economic Variables ries: All else equal, those president of the Society for porarily exposed to environments characterized tion), five macro-expectations measures, includ- uncertainty about the with higher uncertainty

Neuroeconomics. by only positive or only negative payoffs; they ing beliefs about future stock market returns or economic environment. 1.0 regarding economic out- Kuhnen’s research spans exhibited a clear bias toward pessimism in learn- the national unemployment rate, as well as self- This idea comes from comes are more likely to neuroeconomics, household ing in the loss domain. Outside of the laboratory, reported household choices such as equity invest- work in cognitive science engage in precaution- 0.8 Correlation of personal finance, and empirical corpo- however, many people have encountered nega- ments or the purchase of homes, durables, or and neuroscience that income and house prices ary behaviors in terms of rate finance, with an empha- tive outcomes on a regular basis, experiencing sig- cars. The large- scale evidence we find using the shows that life adversity, Inflation and house prices consumption, credit, and sis on labor and person- nificant adversity. Do they process information MSC is consistent with the experimental find- which is characterized by 0.6 investment decisions, in nel issues. She has BS degrees about economic outcomes differently than oth- ings. Namely, we find that higher-SES individu- environmental instabil- that they plan to lower in finance and in neurosci- ers in the same age cohort, with the same mac- als are more optimistic about the macro-econ- ity, influences learning. 0.4 their consumption, seek

ence from MIT and a PhD roeconomic history? Neuroscience suggests that omy relative to lower-SES individuals, but that in Specifically, individuals Inflation and personal income additional lines of credit, in finance from Stanford to be the case. Specifically, it has been shown that recessions, this expectations gap narrows dramat- faced with adversity per- 0.2 and invest less in equities. University. Prior to join- experiencing adversity shapes the way the brain ically.5 [Figure 1 on the following page.] ceive that the overall envi- Our findings sug- 6 ing the University of North learns, so that there is an increased neural sensitiv- While it has been known that SES measures ronment is volatile. 0 gest that it is important to Carolina at Chapel Hill, she ity to loss information and a decreased neural sen- like income and education matter for financial In a recent study, $5,000 15,000 25,000 35,000 45,000 55,000 67,500 82,500 125,000 175,000 200,000 understand which house- 3 was an associate professor sitivity to gain information. In recent research, choices — for example, households earning higher Elyas Fermand, Geng Li, Income holds are more uncer- of finance at Northwestern Sreyoshi Das, Stefan Nagel, Andrei Miu, and I incomes are more likely to participate in the stock Itzhak Ben-David, and I tain in their expectations, University’s Kellogg School find in laboratory experiments as well as in large market — using data from the MSC, we docu- find that lower-SES indi- Source: Fermand E., Kuhnen C. M., Li G., and Ben-David I., NBER Working Paper 25336 as this uncertainty can of Management. survey data that people who have encountered ment that part of the link between SES and house- viduals are more uncer- impact responses to policy more adversity, measured by socioeconomic sta- hold choices can be attributed to the expectations tain in their micro- and Figure 2 changes targeting expec-

20 NBER Reporter • No. 4, December 2019 NBER Reporter • No. 4, December 2019 21 tations and behavior. The 3 “Cumulative Stress fact that lower-SES indi- Self-Eicacy and Financial Delinquency in Childhood Is NBER News viduals and those from Associated with Financial delinquency rate communities with worse 20% Blunted Reward- economic conditions are Related Brain Activity Abhijit Banerjee, Esther Duflo, and Michael Kremer Awarded Nobel Prize the most uncertain sug- 18 in Adulthood,” gests that a reduction of 16 Hanson J, Albert Abhijit Banerjee and Esther uncertainty would have a Late debt D, Iselin A, Carré J, Duflo of MIT and Michael Kremer of higher impact on the deci- 14 Dodge K, Hariri A. Harvard University, all of whom are sions of these individuals Social Cognitive and long-time NBER research associates, than on the decisions of 12 Affective Neuroscience, were awarded the 2019 Nobel Prize Late bills those who are better off. 10 11(3), March 2016, pp. in Economic Sciences. The prize rec- Lastly, neuroscience 405–412. ognizes their contributions to devel- work has documented 8 Return to Text opment economics and the study of 1 2 3 4 5 4 heterogeneity regarding Approximate quintile of Pearlin score “Socioeconomic Status global poverty. In particular, it cites the brain’s response to (A higher quintile indicates a greater level of self-assessed self-eicacy) and Learning from their championing of randomized con- adversity. Specifically, self- Financial Information,” trolled trials and field experiments as Pearlin scores are from the year before financial delinquency status is assessed. Shading represents 95% confidence intervals. efficacy modulates the Source: Kuhnen, C. M., Melzer, B., NBER Working Paper 23028 Kuhnen C, Miu A. methodologies for analyzing how a ability to deal with nega- NBER Working Paper wide range of policy interventions — in From left, Abhijit Banerjee, Esther Duflo, and Michael Kremer 8 tive shocks. Self-efficacy Figure 3 21214, May 2015, and health, education, credit markets, and is a personal characteris- Journal of Financial local governance, among others — can tic that captures the strength of an individ- is that non-cognitive skills, including having Economics 124(2), May 2017, pp. 349–372. contribute to poverty alleviation. experiments among the people who are most affected.” ual’s belief that his or her actions can influ- positive expectations about one’s ability to Return to Text The laureates’ work has“ considerably improved our ability The full announcement of the Nobel Prize award may be ence the future. Using data from the National influence one’s future, can shape the financial 5 “Socioeconomic Status and Macro­ to fight global poverty. In just two decades, their new, experi- found here; the Royal Swedish Academy also provided a lon- Longitudinal Survey of Youth Child and health of populations. Such expectations are economic Expectations,” Das S, Kuhnen ment-based approach has transformed development econom- ger explanation of the scientific contributions that underlie Young Adult sample (NLSY79CYA) of particularly beneficial for individuals coming C, Nagel S. NBER Working Paper 24045, ics,” the Royal Swedish Academy of Sciences said in a state- this work. about 6,000 individuals tracked from their from lower-SES backgrounds, where tradi- November 2017, and forthcoming in ment announcing the award. A key element of the researchers’ On December 8, 2019, the laureates delivered lectures in teens to adulthood, for whom we have tional financial products or intrafamily insur- Review of Financial Studies. strategy is a focus on questions that concern specific contribu- Stockholm on the subject of their prize-winning work. Banerjee detailed financial information in 2010, 2012, ance may not be available to cushion the Return to Text tors to poverty, such as lack of education or poor health. Their and Duflo each lectured on “Field Experiments and the and 2014, as well as measures of self-efficacy effects of negative economic shocks. 6 “Rational Snacking: Young Children’s central methodological contribution is the recognition that Practice of Economics;” Kremer lectured on “Experimentation, earlier in life, Brian Melzer and I find that We still have a lot to learn about why Decision-making on the Marshmallow these questions “are often best answered via carefully designed Innovation, and Economics.” people who have high self-efficacy scores are households differ in their expectations Task is Moderated by Beliefs about more likely later on to avoid being financially about economic variables that can influ- Environmental Reliability,” Kidd C, Palmeri Banerjee’s lecture Duflo’s lecture Kremer’s lecture delinquent, in the sense of missing debt pay- ence their consumption or wealth down the H, Aslin R. Cognition, 126(1), January ments or bill payments, especially when hit road. The data we have so far indicate that 2013, pp. 109–114. by shocks such as a health issue or the loss of a these expectations are predictable to some Return to Text Banerjee is the Ford Foundation International Professor With this year’s awards, 32 current or past NBER job.9 [See Figure 3.] As a result, lower self-effi- degree, and that a lot of these predictions 7 “Expectations Uncertainty and Household ofEconomics at MIT and a co-director of the Adbul Latif research affiliates have received the Nobel Prize: William cacy individuals are more likely to lose access can be informed by work done in other aca- Economic Behavior,” Fermand E, Kuhnen Jameel Poverty Action Lab (J-PAL). He is a research associ- Nordhaus and Paul Romer, 2018; Richard Thaler, 2017; to traditional credit markets and to lose assets demic disciplines, such as neuroscience and C, Li G, Ben-David I. NBER Working ate in the NBER programs on Development Economics and Oliver Hart and Bengt Holmström, 2016; Angus Deaton, through bankruptcy and foreclosures. Those psychology. Household expectations affect Paper 25336, December 2018. Economic Fluctuations and Growth. 2015; Lars Hansen and Robert Shiller, 2013; Alvin Roth, with higher self-efficacy put in more effort to many household economic decisions, and Return to Text NBER papers by Abhijit Banerjee 2012; Thomas Sargent and Christopher Sims, 2011; Peter protect themselves against potential shocks, are critically important determinants of the 8 “Affective State and Locus of Control Diamond, 2010; Paul Krugman, 2008; Edward C. Prescott for example, through insurance or emergency impact of various public policies. Further Modulate the Neural Response to Threat,” Duflo is the Abdul Latif Jameel Professor of Poverty and Finn Kydland, 2004; Robert F. Engle, 2003; Joseph E. savings, and when negative shocks occur, they investigation is needed to understand both Harnett N, Wheelock M, Wood K, Ladnier Alleviation and Development Economics at MIT and a co-direc- Stiglitz, 2001; James J. Heckman and Daniel L. McFadden, have a lower chance of experiencing financial their drivers and their consequences. J, Mrug S, Knight D. Neuroimage 121, tor of JPAL. She is a research associate in four NBER programs: 2000; Robert C. Merton and Myron S. Scholes, 1997; distress. We find that the beneficial effect of November 2015, pp. 217–226. Economics of Aging, Children, Development Economics, and Robert E. Lucas, Jr., 1995; and the late Dale Mortensen, having high self-efficacy in terms of avoiding 1 “The Neural Basis of Financial Risk- Return to Text Education. 2010; Robert W. Fogel, 1993; Gary S. Becker, 1992; 9 financial distress is triple in size for individu- Taking,” Kuhnen C, Knutson B. Neuron, “Non-Cognitive Abilities and Financial NBER papers by Esther Duflo George J. Stigler, 1982; Theodore W. Schultz, 1979; Milton als who have faced economic adversity early 47(5), September 2005, pp. 763–770. Delinquency: The Role of Self-Efficacy in Friedman, 1976; and Simon Kuznets, 1971. in life, as measured by having a mother who Return to Text Avoiding Financial Distress,” Kuhnen C, Michael Kremer, the Gates Professor of Developing Societies In addition, six current or past members of the NBER was in the lowest third of the population in 2 “Asymmetric Learning from Financial Melzer B. NBER Working Paper 23028, at Harvard, is also a research associate in four NBER programs: Board of Directors have received the Nobel Prize: George Children, Development Economics, Economic Fluctuations wealth, relative to the effect observed among Information,” Kuhnen C. Journal of Finance, January 2017, and Journal of Finance, 73(6), Akerlof, 2001; Robert Solow, 1987; and the late William those whose mothers’ wealth was in the top 70(5), October 2015, pp. 2029–2062. December 2018, pp. 2837–2869. and Growth, and Education. Vickrey, 1996; Douglass North, 1993; James Tobin, 1981; third. The broad implication of these findings Return to Text Return to Text NBER papers by Michael Kremer and Paul Samuelson, 1970.

22 NBER Reporter • No. 4, December 2019 NBER Reporter • No. 4, December 2019 23 New Research Associates and Faculty Research Fellows Named James Sallee, UC, Berkeley (Public Economics) Casey Warman, Dalhousie University (Health Economics) Alexi Savov, New York University (Asset Pricing) Johannes Wieland, UC, San Diego (Monetary Economics) The NBER Board of Directors ate training at 24 different institutions. July 2019. FRFs are appointed by the appointed 41 new research associates at As of December 1, 2019, there were NBER president, also on the advice of Allison Shertzer, University of Pittsburgh Jing Cynthia Wu, University of Notre Dame its September 2019 meeting. Research 1,256 research associates and 307 fac- program directors and steering com- (Development of the American Economy) (Monetary Economics) associates (RAs) must be tenured fac- ulty research fellows. With the excep- mittees and following a call for nomi- Crystal Yang, Harvard University (Law and Economics) ulty members at North American col- tion of one scholar who was previously nations in January. They must hold pri- Juan Carlos Suárez Serrato, Duke University leges or universities; their appoint- a research associate, resigned while in mary academic appointments in North (Public Economics) Mao Ye, University of Illinois (Asset Pricing) ments are recommended to the board public service, and was re-elected, all America. Haoxiang Zhu, MIT (Asset Pricing) by the directors of the NBER’s 20 of the new research associates were The names and affiliations of the To m Vo g l , UC, San Diego (Children) research programs, typically after con- previously faculty research fellows. newly promoted and newly appointed Nicolas L. Ziebarth, Auburn University sultation with a steering committee of Most were recently granted tenure at NBER affiliates, along with the names Christopher Walters, UC, Berkeley (Education) (Development of the American Economy) leading scholars. their home institutions and therefore of the universities where they received The new research associates are became eligible for RA status. Ph.Ds., are listed below. The entry Shing-Yi Wang, University of Pennsylvania affiliated with 26 different colleges and Two new faculty research fel- in italics designates the RA who was (Development Economics) universities; they received their gradu- lows (FRFs) were also appointed in reappointed.

Research Associates Faculty Research Fellows Christina Patterson, University of Chicago Winnie van Dijk, University of Chicago Nikhil Agarwal, MIT (Industrial Organization) Xavier Giroud, Columbia University (Corporate Finance) (Monetary Economics) (Public Economics) Jennie Bai, Georgetown University (Asset Pricing) Joshua Goodman, Brandeis University (Education)

Yan Bai, University of Rochester Koichiro Ito, University of Chicago (Environment and Energy) (International Finance and Macroeconomics) Amir Kermani, UC, Berkeley (Monetary Economics) Matilde Bombardini, University of British Columbia (Political Economy) Judd Kessler, University of Pennsylvania (Public Economics)

Jaroslav Borovička, New York University (Asset Pricing) Carl Kitchens, Florida State University (Development of the American Economy) Laurent Bouton, Georgetown University (Political Economy) Joanna Lahey, Texas A&M University (Aging) Richard Burkhauser, Cornell University (Aging) Robin Lee, Harvard University (Industrial Organization) Leonardo Bursztyn, University of Chicago (Political Economy) Derek Lemoine, University of Arizona Rafael Dix-Carneiro, Duke University (Environment and Energy) (International Trade and Investment) Shanjun Li, Cornell University (Environment and Energy) Will Dobbie, Harvard University (Education) Adrienne Lucas, University of Delaware (Children)

Michael Ewens, Caltech Rosalie Liccardo Pacula, University of Southern California (Productivity, Innovation, and Entrepreneurship) (Health Economics)

Benjamin Faber, UC, Berkeley Seth Richards-Shubik, Lehigh University (Health Economics) (International Trade and Investment) Raffaella Sadun, Harvard University Thibault Fally, UC, Berkeley (Productivity, Innovation, and Entrepreneurship) (International Trade and Investment)

24 NBER Reporter • No. 4, December 2019 NBER Reporter • No. 4, December 2019 25 • Mathieu Aubry, École des Ponts ParisTech; Roman Kräussl, University of Luxembourg; Gustavo Manso, University of Conferences California, Berkeley; and Christophe Spaenjers, HEC Paris, “Machines and Masterpieces: Predicting Prices in the Art Auction Market” Tax Policy and the Economy • Ajay K. Agrawal; John McHale, National University of Ireland; and Alexander Oettl, Georgia Institute of Technology and NBER, “A Model of AI-Aided Scientific Discovery and Innovation”

An NBER conference on Tax Policy and the Economy took place in Washington, DC, September 26. Research Associate • Daniel Rock, MIT, “Engineering Value: The Returns to Technological Talent and Investments in Artificial Intelligence” Robert A. Moffitt of Johns Hopkins University organized the meeting, which was sponsored by the Harry and Lynde Bradley Foundation. These researchers’ papers were presented and discussed: • Daniel Bjorkegren, Brown University, and Joshua Blumenstock, University of California, Berkeley, “Manipulation- Proof Machine Learning” • Jonathan Meer, Texas A&M University and NBER, and Benjamin Priday, Texas A&M University, “The Impact of Income, Wealth, and Tax Policy on Charitable Giving” • Mariano-Florentino Cuéllar, California Supreme Court and Stanford University; Benjamin Larsen, Copenhagen Business School; and Yong Suk Lee and Michael Webb, Stanford University, “Impact of Artificial Intelligence • Katherine Baicker, University of Chicago and NBER; Mark Shepard, Harvard University and NBER; and Jonathan Regulation on Artificial Intelligence Adoption and Innovation” S. Skinner, Dartmouth College and NBER, “One Medicare for All? The Economics of a Uniform Health Insurance Program” (NBER Working Paper 24037) • Ansgar Walther and Tarun Ramadorai, Imperial College London; Paul Goldsmith-Pinkham, Yale University; and Andreas Fuster, Swiss National Bank, “Predictably Unequal? The Effect of Machine Learning on Credit Markets” • Casey B. Mulligan, University of Chicago and NBER, “The Employer Penalty, Voluntary Compliance, and the Size Distribution of Firms: Evidence from a Survey of Small Businesses” • Seth G. Benzell, Boston University; Laurence J. Kotlikoff, Boston University and NBER; Guillermo LaGarda, Inter-American Development Bank; and Jeffrey D. Sachs, Columbia University and NBER, “Robots Are Us: Some • Robert J. Barro, Harvard University and NBER, and Brian Wheaton, Harvard University, “Taxes, Incorporation, and Economics of Human Replacement” Productivity” (NBER Working Paper 25508) • Matthew Jackson, Stanford University, and Zafer Kanik, MIT, “How Automation that Substitutes for Labor Affects • John Beshears and David Laibson, Harvard University and NBER; James J. Choi, Yale University and NBER; Mark Production Networks, Growth, and Income Inequality” Iwry, The Brookings Institution; David C. John, AARP Public Policy Institute; and Brigitte C. Madrian, Brigham Young University and NBER, “Building Emergency Savings Through Employer-Sponsored Rainy Day Savings Accounts” • Marcus Dillender, University of Illinois at Chicago, and Eliza Forsythe, University of Illinois, Urbana-Champaign, “Computerization of White Collar Jobs” Summaries of these papers are at www.nber.org/conferences/2019/TPE19/summary.html • Edward L. Glaeser and Michael Luca, Harvard University and NBER, and Andrew Hillis, Hyunjin Kim, and Scott Duke Kominers, Harvard University, “How Does Compliance Affect the Returns to Algorithms? Evidence from Boston’s Restaurant Inspectors”

Economics of Artificial Intelligence • Jill Grennan, Duke University, and Roni Michaely, Cornell Tech, “Artificial Intelligence and the Future of Work: Evidence from Analysts”

An NBER conference on Economics of Artificial Intelligence took place in Toronto September 26–27. Research Associates • Gillian Hadfield, University of Toronto, and Jack A. Clark, Import AI, “Regulatory Markets for AI Safety” Ajay K. Agrawal, Joshua S. Gans, and Avi Goldfarb, all of the University of Toronto, and Catherine Tucker of MIT organized the meeting, which was sponsored by the Alfred P. Sloan Foundation and the Creative Destruction Lab. These researchers’ papers were • Bo Cowgill and Fabrizio Dell’Acqua, Columbia University, “Biased Programmers? Or Biased Data? A Field Experiment presented and discussed: about Algorithmic Bias”

• Julian Tszkin Chan, Bates White Economic Consulting, and Weifeng Zhong, Mercatus Center at George Mason • Prasanna Tambe and Lorin Hitt, University of Pennsylvania; Erik Brynjolfsson, MIT and NBER; and Daniel Rock, University, “Reading China: Predicting Policy Change with Machine Learning” MIT, “AI and Intangible Capital”

• Joel M. Klinger, Juan C. Mateos-Garcia, and Konstantinos M. Stathoulopoulos, Nesta, “Deep Learning, Deep • Susan Athey, Stanford University and NBER, “The Value of Data for Personalization in Retail” Change? Mapping the Development of the Artificial Intelligence General Purpose Technology” • Adair Morse, University of California, Berkeley and NBER, and Robert P. Bartlett III, Richard Stanton, and Nancy • David Autor, MIT and NBER, and Anna M. Salomons, Utrecht University, “New Frontiers: The Evolving Content and Wallace, University of California, Berkeley, “Consumer Lending Discrimination in the Era of FinTech” Geography of New Work in the 20th Century” • Benjamin R. Handel and Jonathan T. Kolstad, University of California, Berkeley and NBER; and Jonathan Gruber, • James Bessen, Boston University; Maarten Goos, London School of Economics; Anna M. Salomons; and Wiljan van MIT and NBER, “Managing Intelligence: Skilled Experts and AI in Markets for Complex Products” den Berge, CPB Netherlands Bureau for Economic Policy Analysis, “Automatic Reaction – What Happens to Workers at Firms that Automate?” Summaries of these papers are at www.nber.org/conferences/2019/AIf19/summary.html

26 NBER Reporter • No 4, December 2019 NBER Reporter • No. 4, December 2019 27 Taxation of Business Income Cities, Labor Markets, and the Global Economy Conference

An NBER conference on Taxation of Business Income took place in Cambridge on October 2–3. Research Associates Joshua An NBER conference on Cities, Labor Markets, and the Global Economy took place in Cambridge on October 25–26. Rauh of Stanford University and Owen M. Zidar of Princeton University organized the meeting, which was sponsored by the Smith Research Associates Edward L. Glaeser of Harvard University and Stephen J. Redding of Princeton University organized the meet- Richardson Foundation. These researchers’ papers were presented and discussed: ing, which was sponsored by the Smith Richardson Foundation. These researchers’ papers were presented and discussed:

• Sebastian Bustos, Harvard University; Dina Pomeranz, University of Zurich; Juan Carlos Suárez Serrato, Duke • Eran Hoffmann, Hebrew University, and Monika Piazzesi and Martin Schneider, Stanford University and NBER, University and NBER; José Vila-Belda, University of Zurich, and Gabriel Zucman, University of California, Berkeley “Jobs at Risk, Regional Growth, and Labor Market Flows” and NBER, “Monitoring Tax Compliance by Multinationals: Evidence from a Natural Experiment in Chile” • Jan Eeckhout, University College London; Christoph Hedtrich, Universitat Pompeu Fabra; and Roberto Pinheiro, • Sabrina T. Howell, New York University and NBER, and Filippo Mezzanotti, Northwestern University, “Financing Federal Reserve Bank of Cleveland, “Technology, Spatial Sorting, and Job Polarization” Entrepreneurship through the Tax Code: Angel Investor Tax Credits” • Sharat Ganapati, Georgetown University; Woan Foong Wong, University of Oregon; and Oren Ziv, Michigan State • Jennifer Blouin, University of Pennsylvania, and Leslie Robinson, Dartmouth College, “Double Trouble: How Much of University, “Entrepot” US Multinationals’ Profits Are Really in Tax Havens?” • Cecile Gaubert, Patrick M. Kline, and Danny Yagan, University of California, Berkeley and NBER, “Place-Based • Scott R. Baker, Northwestern University and NBER; Stephen Teng Sun, Peking University; and Constantine Yannelis, Redistribution” University of Chicago and NBER, “Corporate Taxes and Retail Prices” • Esteban Rossi-Hansberg, Princeton University and NBER; and Pierre-Daniel Sarte and Felipe Schwartzman, Federal • Audrey Guo, Santa Clara University, “The Effects of Unemployment Insurance Taxation on Multi-Establishment Firms” Reserve Bank of Richmond, “Cognitive Hubs and Spatial Redistribution” (NBER Working Paper 26267)

• Chatib Basri, University of Indonesia; Mayara Felix, MIT; Rema Hanna, Harvard University and NBER; and • Fabian Eckert, Princeton University, “Growing Apart: Tradable Services and the Fragmentation of the US Economy” Benjamin A. Olken, MIT and NBER, “Tax Administration vs. Tax Rates: Evidence from Corporate Taxation in Indonesia” (NBER Working Paper 26150) • Nicholas Bloom, Stanford University and NBER; Kyle Handley, University of Michigan and NBER; André Kurmann, Drexel University; and Philip A. Luck, University of Colorado Denver, “The Impact of Chinese Trade on US • Cailin R. Slattery, Columbia University, “Bidding for Firms: Subsidy Competition in the US” Employment: The Good, The Bad, and The Debatable”

• Max Risch, University of Michigan, “Does Taxing Business Owners Affect Their Employees? Evidence from a Change in • Gabriel Kreindler, Harvard University, and Yuhei Miyauchi, Boston University, “Measuring Commuting and Economic the Top Marginal Tax Rate” Activity inside Cities with Cell Phone Records”

• Christine L. Dobridge, Federal Reserve Board; and Paul Landefeld and Jake Mortenson, Joint Committee on • Costas Arkolakis, Yale University and NBER; Rodrigo Adão, University of Chicago and NBER; and Federico Taxation, “Corporate Taxes and the Wage Distribution: Effects of the Domestic Production Activities Deduction” Esposito, Tufts University, “General Equilibrium Indirect Effects in Space: Theory and Measurement”

• Enrico Moretti, University of California, Berkeley and NBER, and Daniel Wilson, Federal Reserve Bank of San • Victor Couture, University of California, Berkeley; Cecile Gaubert, University of California, Berkeley and NBER; Francisco, “Taxing Billionaires: Estate Taxes and the Geographical Location of the Forbes 400” Jessie Handbury, University of Pennsylvania and NBER; and Erik Hurst, University of Chicago and NBER, “Income Growth and the Distributional Effects of Urban Spatial Sorting” (NBER Working Paper 26142) • Lucas Goodman, Katherine Lim, and Andrew Whitten, US Department of the Treasury, and Bruce Sacerdote, Dartmouth College and NBER, “Impacts of the 199A Deduction for Pass-through Owners” Summaries of these papers are at www.nber.org/conferences/2019/CLMf19/summary.html

• Cailin R. Slattery and Owen M. Zidar, “Evaluating State and Local Business Tax Incentives”

Summaries of these papers are at www.nber.org/conferences/2019/TBIf19/summary.html

28 NBER Reporter • No 4, December 2019 NBER Reporter • No. 4, December 2019 29 Health, Wellbeing, and Children’s Outcomes for Native • Colleen Carey, Cornell University and NBER, and David Molitor and Nolan H. Miller, University of Illinois at Urbana-Champaign and NBER, “Why Does Disability Insurance Enrollment Increase during Recessions? Evidence from Americans and Other Indigenous Peoples Medicare”

• Charles I. Jones and Peter J. Klenow, Stanford University and NBER, “The Economic Well-Being of the US An NBER conference on Health, Wellbeing, and Children’s Outcomes for Native Americans and Other Indigenous Peoples Population, 1970–Present” took place November 1 in Cambridge. Research Associate Randall Akee of the University of California, Los Angeles and Faculty Research Fellow Emilia Simeonova of Johns Hopkins University organized the meeting, which was sponsored by the National Summaries of these papers are at www.nber.org/conferences/2019/MPHf19/summary.html Institute on Aging through the NBER Center for Aging and Health Research. These researchers’ papers were presented and discussed:

• Richard H. Steckel, Ohio State University and NBER, and Kris Inwood, University of Guelph, “Changes in the Well- Being of Native Americans Born in the Northwest, 1830–1900” Labor Demand and Older Workers

• Stefanie Schurer, University of Sydney; Mary Alice Doyle, Poverty Action; and Sven Silburn, Menzies School of Health Research, “Why did Australia’s Major Welfare Reform Lead to Worse Birth Outcomes in Aboriginal Communities?” An NBER conference on Labor Demand and Older Workers took place November 15 in Cambridge. Research Associate Kevin S. Milligan of the University of British Columbia organized the meeting, which was sponsored by the Alfred P. Sloan Foundation. • Donna Feir, Federal Reserve Bank of Minneapolis, and Maggie Jones and David Scoones, University of Victoria, “The These researchers’ papers were presented and discussed: Legacy of Indian Missions in the United States” • Johanna Catherine Maclean, Temple University and NBER; Stefan Pichler, ETH Zurich; and Nicolas R. Ziebarth, • Maggie Jones, “Student Aid and the Distribution of Educational Attainment” Cornell University, “Mandated Sick Pay: Coverage, Utilization, and Welfare Effects”

• Brooks A. Kaiser, University of Southern Denmark, “Growth, Transition, and Decline in Resource Based Socio- • Joseph Marchand, University of Alberta, and Kevin S. Milligan, “Natural Resource Booms and Older Workers” Ecological Systems” • Marco Angrisani and Erik Meijer, University of Southern California, and Arie Kapteyn, University of Southern • Dustin Frye, Vassar College, and Christian Dippel, University of California, Los Angeles and NBER, “The Effect of California and NBER, “Sorting into Jobs and Labor Supply and Demand at Older Ages” Land Allotment on Native American Households during the Assimilation Era” • Daron Acemoglu, MIT and NBER, and Pascual Restrepo, Boston University, “Demographics and Automation” Summaries of these papers are at www.nber.org/conferences/2019/IPf19/summary.html (NBER Working Paper 24421)

• Simon Jäger, MIT and NBER, and Benjamin Schoefer, University of California, Berkeley, “Wages and the Value of Nonemployment” (NBER Working Paper 25230)

Macroeconomic Perspectives on the Value of Health Summaries of these papers are at www.nber.org/conferences/2019/LDOWf19/summary.html

An NBER conference on Macroeconomic Perspectives on the Value of Health took place November 8 in Cambridge. Research Associate Chad Syverson of the University of Chicago organized the meeting, which was sponsored by the Robert Wood Johnson Foundation. These researchers’ papers were presented and discussed: Economics of Infrastructure Investment

• David M. Cutler, Harvard University and NBER, “A Satellite Account for Health in the United States” An NBER conference on Economics of Infrastructure Investment took place November 15–16 in Cambridge. Research • Adriana Lleras-Muney, University of California, Los Angeles and NBER, and Flavien E. Moreau, University of Associates Edward L. Glaeser of Harvard University and James M. Poterba of MIT organized the meeting, which was sponsored by California, Los Angeles, “A Unified Law of Mortality for Economic Analysis” the Smith Richardson Foundation. These researchers’ papers were presented and discussed:

• Seidu Dauda, World Bank Group; Abe Dunn, Bureau of Economic Analysis; and Anne E. Hall, Department of the • Leah Brooks, George Washington University, and Zachary Liscow, Yale University, “Is Infrastructure Spending Like Treasury, “Are Medical Prices Still Declining? A Systematic Examination of Quality-Adjusted Price Index Alternatives for Other Spending?” Medical Care” • Matthew Turner, Brown University and NBER, and Geetika Nagpal, Brown University, “Transportation Infrastructure • Mary O’Mahony and Lea Samek, King’s College London, “Health and Human Capital” in the US”

• Anne E. Hall, “Declines in Health and Widening Socioeconomic Inequalities among the Working-Age Population and • Jennifer Bennett, Robert Kornfeld, and David Wasshausen, Bureau of Economic Analysis, and Daniel E. Sichel, Their Implications for Work-related Disability: Evidence from the National Health Interview Survey 1997–2018” Wellesley College and NBER, “Measuring Infrastructure in BEA’s National Economic Accounts”

30 NBER Reporter • No 4, December 2019 NBER Reporter • No. 4, December 2019 31 • Shane Greenstein, Harvard University and NBER, “Digital Infrastructure” India in the Global Economy

• Valerie A. Ramey, University of California, San Diego and NBER, “Macroeconomic Consequences of Infrastructure Investment” The NBER, along with the Indian Council for Research on International Economic Relations (ICRIER) and the National Council for Applied Economic Research (NCAER), two research organi- • Dejan Makovsek, International Transport Forum at the OECD, and Adrian Bridge, Queensland University of zations based in New Delhi, India, sponsored a meeting in New Delhi and Neemrana, India, December 13–15. The Technology, “Procurement Practices and Infrastructure Costs” meeting, which focused on “India in the Global Economy,” was the 21st gathering in this series of research exchanges. The meeting included NBER researchers as well as economists from Indian universities, research institutions, and government • Eduardo Engel and Ronald Fischer, Universidad de Chile, and Alexander Galetovic, Adolfo Ibáñez University, departments. NBER Research Associate Abhijit Banerjee of MIT organized the conference jointly with Rajat Kathuria of ICRIER. “International Experience with Public-Private Partnerships in Infrastructure” The meeting included remarks on current policy developments from Nirmala Sitharaman, the Honorable Union Minister of Finance and Corporate Affairs for India. • Deborah J. Lucas, MIT and NBER, and Jorge Alberto Jimenez Montesinos, MIT, “A Fair Value Approach to Valuing The NBER participants were: Neeraj Kaushal, Columbia University; Edward Glaeser and Rema Hanna, Harvard Public Infrastructure Projects and the Risk Transfer in Public Private Partnerships” University; Anne Krueger and John Lipsky, Johns Hopkins University; Parag Pathak and James Poterba, MIT; Stephen Redding, Princeton University; Alan Auerbach, University of California, Berkeley; Kathleen McGarry, University of Summaries of these papers are at www.nber.org/conferences/2019/EIf19/summary.html California, Los Angeles; Karthik Muralidharan, University of California, San Diego; Marianne Bertrand and Raghuram Rajan, University of Chicago; Charles Engel, University of Wisconsin; and Michael Peters, Yale University. Each delivered a research presentation and participated in discussion with Indian counterparts in related fields. Topics discussed included the economics of fiscal policy and tax design; urbanization; global economic growth and trade; the effects of aging populations on health status and economic performance; education, skills, and human capital acquisition; the challenge of Innovation Information Initiative job creation; and inequality and economic mobility.

The NBER’s Innovation Information Initiative convened December 6–7 in Cambridge. Research Associates Adam B. Jaffe of Brandeis University, Bronwyn H. Hall of University of California, Berkeley, and Bhaven N. Sampat of Columbia University were joined by Osmat Azzam Jefferson of Queensland University of Technology, Samuel J. Klein of MIT, and Matt Marx of Boston University in organizing the meeting, which was sponsored by the Alfred P. Sloan Foundation. The following researchers made pre- Program and Working Group Meetings sentations about existing or prospective data-creation projects and opportunities: • Gaétan de Rassenfosse, Ecole polytechnique federale de Lausanne (EPFL), “Linking Products to Patents” Chinese Economy • Jeffrey M. Kuhn, University of North Carolina, “Applications of Textual Similarity to Measure Construction and Evaluation” Members of the NBER’s Chinese Economy Working Group met September 26–27 in Cambridge. Research Associates Nancy Qian of Northwestern University, Shang-Jin Wei of Columbia University, and Daniel Xu of Duke University organized the meet- • Deyun Yin, World Intellectual Property Organization, “Challenges and Solutions in the Construction of Chinese Patent ing. These researchers’ papers were presented and discussed: Database” • Jing Cai, University of Maryland and NBER, and Adam Szeidl, Central European University, “Direct and Indirect • Ashish Arora and Sharon Belenzon, Duke University and NBER, and Lia Sheer, Duke University, “The Role of Effects of Financial Access on SMEs” Company Names and Ownership Changes in the Dynamic Reassignments of Patents” • Li Feng and Haofei Wang, Shanghai Jiao Tong University; Jun Qian and Lei Zhu, Fudan University, “Stock Pledged • Osmat Azzam Jefferson, Queensland University of Technology, “Lenslab and the Lens public API” Loans, Capital Markets, and Firm Performance: the Good, the Bad and the Ugly”

• Matt Marx, Boston University, “Toward a Complete Set of Patent References to Science” • Alain de Janvry and Elisabeth Sadoulet, University of California, Berkeley; Guojun He, Hong Kong University of Science and Technology; Shaoda Wang, University of Chicago; and Qiong Zhang, Renmin University of China, • Lisa D. Cook, Michigan State University and NBER, “Race, Ethnicity, and Patenting: USPTO’s New Data Collection “Influence Activities and Bureaucratic Performance: Evidence from a Large-Scale Field Experiment in China” Effort” • Daniel Berkowitz, University of Pittsburgh; Yi Lu, National University of Singapore; and Mingqin Wu, South China • Samuel J. Klein, “Prior Art” Normal University, “What Makes Local Governments More Accoutable? Evidence from a Website Reform”

• Mitsuru Igami, Yale University, “Mapping Firms’ Locations in Technological Space” • Hanming Fang, University of Pennsylvania and NBER; Linke Hou, Shandong University; Mingxing Liu and Pengfei Zhang, Peking University; and Lixin Colin Xu, The World Bank, “Factions, Local Accountability, and Long-Term • Dominique Guellec, Observatoire des Sciences et Techniques, “Novelty and Impact” Development: Theory and Evidence”

• Martina Iori, Sant’Anna School of Advanced Studies, “The Complexity of Knowledge” • Harald Hau and Difei Ouyang, University of Geneva, “Capital Scarcity and Industrial Decline: Evidence from 172 Real Estate Booms in China”

32 NBER Reporter • No 4, December 2019 NBER Reporter • No. 4, December 2019 33 • John Ammer and John Rogers, Federal Reserve Board, and Gang Wang and Yang Yu, Shanghai University of Finance Market Design and Economics, “The Value of Institutional Research: Fund Managers and Monetary Policy Expectations in China”

• Bei Qin, University of Hong Kong; David Stromberg, Stockholm University; and Yanhui Wu, University of Southern Members of the NBER’s Market Design Working Group met October 18–19 in Cambridge. Research Associates Michael California, “Social Media, Information Networks, and Protests in China” Ostrovsky of Stanford University and Parag A. Pathak of MIT organized the meeting. These researchers’ papers were presented and discussed: • Panle Jia Barwick and Shanjun Li, Cornell University and NBER; Liguo Lin, Shanghai University of Finance and Economics; and Eric Zou, Cornell University, “From Fog to Smog: The Value of Pollution Information” • Liran Einav, Stanford University and NBER; Amy Finkelstein, MIT and NBER; Yunan Ji, Harvard University; and Neale Mahoney, University of Chicago and NBER, “Voluntary Regulation: Evidence from Medicare Bundled Payments” • Yi Huang, The Graduate Institute, Geneva; Chen Lin, University of Hong Kong; Sibo Liu, Lingnan University; and Heiwai Tang, Johns Hopkins University, “Trade Networks and Firm Value: Evidence from the US-China Trade War” • Amanda Y. Agan, Rutgers University and NBER; Bo Cowgill, Columbia University; and Laura K. Gee, Tufts University, “Salary Disclosure and Hiring: Field Experimental Evidence from a Two-Sided Audit Study” Summaries of these papers are at www.nber.org/conference.nber.org/conferences/2019/CEf19/summary.html • Nicole Immorlica and Brendan Lucier, Microsoft Research; Jacob D. Leshno, University of Chicago; and Irene Y. Lo, Stanford University, “Information Acquisition Costs in Matching Markets”

• Christina Aperjis, Power Auctions LLC; Lawrence Ausubel, University of Maryland; and Oleg V. Baranov, University Political Economy of Colorado Boulder, “Supply Reduction in the Broadcast Incentive Auction”

• Yannai A. Gonczarowski, Microsoft Research; Lior Kovalio and Noam Nisan, Hebrew University of Jerusalem; and Members of the NBER’s Political Economy Program met October 11 in Cambridge. Research Associates Ernesto Dal Bó of Assaf Romm, Hebrew University of Jerusalem and Stanford University, “Matching for the Israeli ‘Mechinot’ Gap-Year the University of California, Berkeley and Francesco Trebbi of the University of British Columbia organized the meeting. These Programs: Handling Rich Diversity Requirements” researchers’ papers were presented and discussed: • Tayfun Sönmez and M. Bumin Yenmez, Boston College, “Affirmative Action in India via Vertical and Horizontal • Meera Mahadevan, University of California, Santa Barbara, “The Price of Power: Costs of Political Corruption in Indian Reservations” Electricity” • Marek Pycia, University of Zurich, “Evaluating with Statistics: Which Outcome Measures Differentiate among Matching • Avinash Dixit, Princeton University, “ ‘We haven’t got but one more day’ — The Cuban Missile Crisis as a Dynamic Mechanisms?” Chicken Game” • Daniel C. Waldinger, New York University, “Targeting In-Kind Transfers Through Market Design: A Revealed • Michael Callen, University of California, San Diego and NBER; Saad Gulzar, Stanford University; Soledad A. Preference Analysis of Public Housing Allocation” Prillaman, University of Oxford; and Rohini Pande, Yale University and NBER, “Does Revolution Work? Post- Revolutionary Evolution of Nepal’s Political Classes” • Joshua Angrist and Parag A. Pathak, MIT and NBER, and Roman Zarate, MIT, “Choice and Consequence: Assessing Mismatch at Chicago Exam Schools” (NBER Working Paper 26137) • Abhay Aneja, Stanford University, and Carlos Avenancio, Indiana University, “The Effect of Political Power on Labor Market Inequality: Evidence from the 1965 Voting Rights Act” • Mohammad Akbarpour, Stanford University; Julien Combe, University College London; Yinghua He, Rice University; Victor Hiller, Université Paris II; Robert Shimer, University of Chicago and NBER; and Olivier Tercieux, • Katherine Casey, Stanford University and NBER; and Abou Bakarr Kamara and Niccoló Meriggi, International Paris School of Economics, “Unpaired Kidney Exchange: Overcoming Double Coincidence of Wants without Money” Growth Centre, “An Experiment in Candidate Selection” (NBER Working Paper 26160) • Gianluca Brero and Sven Seuken, University of Zurich, and Benjamin Lubin, Boston University, “Machine Learning- • Camilo García-Jimeno, Emory University and NBER, and Alberto Ciancio, Population Studies Center, “The Political Powered Iterative Combinatorial Auctions” Economy of Immigration Enforcement: Conflict and Cooperation under Federalism” (NBER Working Paper 25766) • Nick Arnosti, Columbia University, and Peng Shi, University of Southern California, “Design of Lotteries and Waitlists Summaries of these papers are at www.nber.org/conferences/2019/POLf19/summary.html for Affordable Housing Allocation”

Summaries of these papers are at www.nber.org/conferences/2019/MDf19/summary.html

34 NBER Reporter • No 4, December 2019 NBER Reporter • No. 4, December 2019 35 Public Economics • Giuseppe Moscarini, Yale University and NBER, and Fabien Postel-Vinay, University College London, “The Job Ladder: Inflation vs. Reallocation”

Members of the NBER’s Public Economics Program met October 24–25 in Chicago. Program Director Amy Finkelstein of • Fernando E. Alvarez, University of Chicago and NBER, and David O. Argente, Pennsylvania State University, MIT and Research Associate Neale Mahoney of the University of Chicago organized the meeting. These researchers’ papers were “Consumer Surplus of Alternative Payment Methods: Paying Uber with Cash” presented and discussed: • Maryam Farboodi, MIT and NBER, and Peter Kondor, London School of Economics, “Rational Sentiments and • Hunt Allcott, New York University and NBER; Joshua J. Kim, Stanford University; Dmitry Taubinsky, University of Economic Cycles” California, Berkeley and NBER; and Jonathan Zinman, Dartmouth College and NBER, “Payday Lending, Self Control, and Consumer Protection” • Martin Beraja, MIT and NBER; Rodrigo Adão, University of Chicago and NBER; and Nitya Pandalai-Nayar, University of Texas at Austin and NBER, “Technological Transitions with Skill Heterogeneity across Generations” • Patrick Bayer, Duke University and NBER; Peter Q. Blair, Harvard University and NBER; and Kenneth Whaley, Clemson University, “Is Spending on Schools Efficient? A National Study of the Capitalization of School Spending and Summaries of these papers are at www.nber.org/conferences/2019/EFGf19/summary.html Local Taxes”

• Joshua Rauh, Stanford University and NBER, and Ryan J. Shyu, Stanford University, “Behavioral Responses to State Income Taxation of High Earners: Evidence from California” (NBER Working Paper 26349) International Finance and Macroeconomics • Nathaniel Hendren, Harvard University and NBER, and Benjamin D. Sprung-Keyser, Harvard University, “A Unified Welfare Analysis of Government Policies” (NBER Working Paper 26144) Members of the NBER’s International Finance and Macroeconomics Program met October 25 in Cambridge. Research • Michael Gelman, Claremont McKenna College; Shachar Kariv, University of California, Berkeley; Matthew D. Associates Guido Lorenzoni of Northwestern University and Vivian Yue of Emory University organized the meeting. These Shapiro, University of Michigan and NBER; and Dan Silverman, Arizona State University and NBER, “Rational researchers’ papers were presented and discussed: Illiquidity and the Marginal Propensity to Consume: Theory and Evidence from Income Tax Withholding and Refunds” • Chenzi Xu, Harvard University, “Reshaping Global Trade: The Immediate and Long-Run Effects of Bank Failures” • Daniel C. Waldinger, New York University, “Targeting In-Kind Transfers Through Market Design: A Revealed Preference Analysis of Public Housing Allocation” • Jordi Galí, CREI and NBER, “Uncovered Interest Parity, Forward Guidance and the Exchange Rate”

• Cailin R. Slattery, Columbia University, “Bidding for Firms: Subsidy Competition in the US.” • Gabriel Chodorow-Reich, Harvard University and NBER; Loukas Karabarbounis, University of Minnesota and NBER; and Rohan Kekre, University of Chicago, “The Macroeconomics of the Greek Depression” (NBER Working • Juliana Londono-Velez, University of California, Los Angeles and NBER, “Can Wealth Taxation Work in Developing Paper 25900) Countries? Quasi-Experimental Evidence from Colombia” • Javier Bianchi, Federal Reserve Bank of Minneapolis and NBER, and César Sosa-Padilla, University of Notre Dame, • Juan Carlos Suárez Serrato and Daniel Xu, Duke University and NBER; Xian Jiang, Duke University; Zhao Chen, “Reserve Accumulation, Macroeconomic Stabilization and Sovereign Risk” Fudan University; and Zhikuo Liu, Shanghai University of Finance and Economics, “Tax Policy and Lumpy Investment Behavior: Evidence from China’s VAT Reform” • Luis Felipe Céspedes, Universidad Adolfo Ibáñez, and Roberto Chang, Rutgers University and NBER, “Optimal Foreign Reserves and Central Bank Policy under Financial Stress” Summaries of these papers are at www.nber.org/conferences/2019/PEf19/summary.html • Jeremy Fouliard, London Business School; Michael Howell, CrossBorder Capital; and Hélène Rey, London Business School and NBER, “Answering the Queen: Machine Learning and Financial Crises”

• Wenxin Du, University of Chicago and NBER; Benjamin M. Hébert, Stanford University and NBER; and Amy Wang Economic Fluctuations and Growth Huber, Stanford University, “Are Intermediary Constraints Priced?”

Summaries of these papers are at www.nber.org/conferences/2019/IFMf19/summary.html Members of the NBER’s Economic Fluctuations and Growth Program met October 25 at the Federal Reserve Bank of Chicago. Research Associates Francisco J. Buera of the Washington University in St. Louis and Ayşegül Şahin of the University of Texas at Austin organized the meeting. These researchers’ papers were presented and discussed:

• Monika Piazzesi and Martin Schneider, Stanford University and NBER; Ciaran Rogers, Stanford University; “Money and Banking in a New Keynesian Model”

• Chang-Tai Hsieh, University of Chicago and NBER, and Esteban Rossi-Hansberg, Princeton University and NBER, “The Industrial Revolution in Services” (NBER Working Paper 25968)

36 NBER Reporter • No 4, December 2019 NBER Reporter • No. 4, December 2019 37 Behavioral Finance Labor Studies

Members of the NBER’s Behavioral Finance Working Group met November 1 in Cambridge. Research Associate Nicholas C. Members of the NBER’s Labor Studies Program met November 7–8 in Chicago. Program Directors David Autor of MIT and Barberis of Yale University organized the meeting. These researchers’ papers were presented and discussed: Alexandre Mas of Princeton University organized the meeting. These researchers’ papers were presented and discussed:

• Peter D. Maxted, Harvard University, “A Macro-Finance Model with Sentiment” • Emily Breza, Harvard University and NBER; Supreet Kaur, University of California, Berkeley and NBER; and Yogita Shamdasani, University of Pittsburgh, “Labor Rationing: A Revealed Preference Approach from Hiring Shocks” • Francesco D’Acunto, Boston College; Ulrike Malmendier, University of California, Berkeley and NBER; Juan Ospina, University of Chicago; and Michael Weber, University of Chicago and NBER, “Exposure to Daily Price Changes and • Gizem Kosar, Federal Reserve Bank of New York; Ayşegül Şahin, University of Texas at Austin and NBER; and Basit Inflation Expectations” (NBER Working Paper 26237) Zafar, Arizona State University and NBER, “The Work-Leisure Tradeoff: Identifying the Heterogeneity”

• Samuel M. Hartzmark and Samuel D. Hirshman, University of Chicago, and Alex Imas, Carnegie Mellon University, • Paul Mohnen, University of Michigan, “The Impact of the Retirement Slowdown on the US Youth Labor Market” “Ownership, Learning and Beliefs” • Henrik Kleven, Princeton University and NBER, “The EITC and the Extensive Margin: A Reappraisal” (NBER • Nicholas C. Barberis; Lawrence J. Jin, California Institute of Technology; and Baolian Wang, University of Florida, Working Paper 26405) “Prospect Theory and Stock Market Anomalies” • Peter Q. Blair, Harvard University and NBER, and Benjamin Posmanick, Clemson University, “When Does Labor • Lars A. Lochstoer, University of California, Los Angeles, and Tyler Muir, University of California, Los Angeles and Market Flexibility Reduce Gender Wage Gaps?” NBER, “Volatility Expectations and Returns” • Ellora Derenoncourt, Princeton University, and Claire Montialoux, University of California, Berkeley, “Minimum • Paul Goldsmith-Pinkham, Yale University, and Kelly Shue, Yale University and NBER, “The Gender Gap in Housing Wages and Racial Inequality” Returns” • Stefano DellaVigna and Ulrike Malmendier, University of California, Berkeley and NBER; John A. List, University Summaries of these papers are at www.nber.org/conferences/2019/BFf19/summary.html of Chicago and NBER; and Gautam Rao, Harvard University and NBER, “Estimating Social Preferences and Gift Exchange with a Piece-Rate Design”

• Brent R. Hickman, Washington University in St. Louis, and Jack Mountjoy, University of Chicago, “The Returns to Monetary Economics College(s): Estimating Value-Added and Match Effects in Higher Education”

Summaries of these papers are at www.nber.org/conferences/2019/LSf19/summary.html Members of the NBER’s Monetary Economics Program met November 1 in San Francisco. Faculty Research Fellows Adrien Auclert of Stanford University and Marco Di Maggio of Harvard University, and Program Directors Emi Nakamura and Jón Steinsson of the University of California, Berkeley organized the meeting. These researchers’ papers were presented and discussed:

• Andrés Blanco, University of Michigan, and Isaac Baley, Universitat Pompeu Fabra, “Aggregate Dynamics in Lumpy Organizational Economics Economies”

• Saki Bigio, University of California, Los Angeles and NBER, and Yuliy Sannikov, Stanford University, “A Model of Members of the NBER’s Organizational Economics Working Group met November 8–9 in Cambridge. Research Associate Intermediation, Money, Interest, and Prices” Robert S. Gibbons of MIT organized the meeting. These researchers’ papers were presented and discussed:

• Anthony A. DeFusco and John A. Mondragon, Northwestern University, “No Job, No Money, No Refi: Frictions to • Dana Foarta and Takuo Sugaya, Stanford University, “Wait-and-See or Step In? Dynamics of Interventions” Refinancing in a Recession” • Canice Prendergast, University of Chicago, “Making A Difference” • Greg Buchak, Stanford University; Gregor Matvos, Northwestern University and NBER; Tomasz Piskorski, Columbia • Mark J. Borgschulte, University of Illinois at Urbana-Champaign; Marius Guenzel, University of California, Berkeley; University and NBER; and Amit Seru, Stanford University and NBER, “The Limits of Shadow Banks” (NBER Working Canyao Liu, Yale University; and Ulrike Malmendier, University of California, Berkeley and NBER, “CEO Stress and Paper 25149) Life Expectancy: The Role of Corporate Governance and Financial Distress” • Francesco Decarolis and Paolo Pinotti, Bocconi University; Raymond Fisman, Boston University and NBER; • Ian Dew-Becker, Northwestern University and NBER; Alireza Tahbaz-Salehi, Northwestern University; and Andrea and Silvia Vannutelli, Boston University, “Rules, Discretion, and Corruption in Procurement: Evidence from Italian Vedolin, Boston University and NBER, “Macro Skewness and Conditional Second Moments: Evidence and Theories” Government Contracting” • Rohan Kekre, University of Chicago, and Moritz Lenel, Princeton University, “Monetary Policy, Redistribution, and • Nicholas Bloom, Stanford University and NBER; Michael Christensen and Jan Rivkin, Harvard University; Raffaella Risk Premia” Sadun, Harvard University and NBER; and Mu-Jeung Yang, University of Utah, “How Do CEOs Make Strategy?” Summaries of these papers are at www.nber.org/conferences/2019/MEf19/summary.html

38 NBER Reporter • No 4, December 2019 NBER Reporter • No. 4, December 2019 39 • Raúl Sanchez de la Sierra, University of Chicago and NBER, and Kristof Titeca, University of Antwerp, “Corruption Asset Pricing in Hierarchies”

• Chen Cheng and Yiqing Xing, Johns Hopkins University, and Wei Huang, National University of Singapore, “A Theory Members of the NBER’s Asset Pricing Program met November 8 at Stanford University. Research Associates Stefano Giglio of of Multiplexity: Sustaining Cooperation with Multiple Relationships” Yale University and Tarek Alexander Hassan of Boston University organized the meeting. These researchers’ papers were presented and discussed: • Ernst Fehr and Ivo Schurtenberger, University of Zurich, “The Dynamics of Norm Formation and Norm Decay” • Matthew Smith, Department of Treasury; Owen M. Zidar, Princeton University and NBER; and Eric Zwick, • Giuseppe Berlingieri, ESSEC Business School and CEP; Frank Pisch, University of St. Gallen; and Claudia University of Chicago and NBER, “Top Wealth in the United States: New Estimates and Implications for Taxing the Steinwender, MIT and NBER, “Organizing Global Supply Chains: Input-Output Linkages and Vertical Integration” Rich” (NBER Working Paper 25286) • Juan Morelli and Diego Perez, New York University, and Pablo Ottonello, University of Michigan and NBER, “Global • W. Bentley MacLeod, Columbia University and NBER, and Victoria Valle Lara and Christian Zehnder, University of Banks and Systemic Debt Crises” Lausanne, “On Building a Conflict Culture in Organizations” • Wenxin Du, University of Chicago and NBER; Benjamin M. Hébert, Stanford University and NBER; and Amy Wang • Katherine Casey, Stanford University and NBER; Edward Miguel, University of California, Berkeley and NBER; Huber, Stanford University, “Are Intermediary Constraints Priced?” (NBER Working Paper 26009) Rachel Glennerster, UK Department for International Development; and Maarten J. Voors, Wageningen University & Research, “Skill versus Voice in Local Development” (NBER Working Paper 25022) • Martin Lettau, University of California, Berkeley and NBER; Sydney C. Ludvigson, New York University and NBER; and Paulo Martins Manoel, University of California, Berkeley, “Characteristics of Mutual Fund Portfolios: Where Are Summaries of these papers are at www.nber.org/conferences/2019/OEf19/summary.html the Value Funds?” (NBER Working Paper 25381)

Summaries of these papers are at www.nber.org/conferences/2019/APf19/summary.html Corporate Finance

Members of the NBER’s Corporate Finance Program met November 8 at Stanford University. Research Associates John Education Graham of Duke University and Paola Sapienza of Northwestern University organized the meeting. These researchers’ papers were presented and discussed: Members of the NBER’s Education Program met November 14–15 in Cambridge. Program Director Caroline M. Hoxby of • Matthew Smith, Department of the Treasury; Owen M. Zidar, Princeton University and NBER; and Eric Zwick, Stanford University organized the meeting. These researchers’ papers were presented and discussed: University of Chicago and NBER, “Top Wealth in America: New Estimates and Implications for Taxing the Rich” • C. Kirabo Jackson, Northwestern University and NBER, and Diether Beuermann, Inter-American Development • Simon Jäger, MIT and NBER; Benjamin Schoefer, University of California, Berkeley; and Jörg Heining, Institut für Bank, “Do Parents Know Best? The Short and Long-Run Effects of Attending the Schools That Parents Prefer” (NBER Arbeitsmarkt und Berufsforschung, “Labor in the Boardroom” Working Paper 24920)

• Jean-Noël Barrot, MIT; Thorsten Martin, HEC Paris; Julien Sauvagnat, Bocconi University; and Boris Vallée, • Richard Murphy, University of Texas at Austin and NBER; Simon Burgess, University of Bristol; and Ellen Greaves, Harvard University, “Employment Effects of Alleviating Financing Frictions: Worker-level Evidence from a Loan Institute for Fiscal Studies, “Deregulating Teacher Labor Markets” Guarantee Program” • Cher Li, Colorado State University, and Basit Zafar, Arizona State University and NBER, “Ask and You Shall Receive? • Ankit Kalda, Indiana University; Marco Di Maggio, Harvard University and NBER; and Vincent Yao, Georgia State Gender Differences in Regrades in College” University, “Second Chance: Life without Student Debt” (NBER Working Paper 25810) • Peter Bergman, Columbia University; Eric W. Chan, Babson College; and Adam Kapor, Princeton University and • Holger Mueller, New York University and NBER, and Constantine Yannelis, University of Chicago and NBER, NBER, “Housing Search Frictions: Evidence from Detailed Search Data and a Field Experiment” “Reducing Barriers to Enrollment in Federal Student Loan Repayment Plans: Evidence from the Navient Field Experiment” • Kevin Mumford, Purdue University, “Student Selection into an Income Share Agreement”

• Winston Wei Dou and Lucian A. Taylor, University of Pennsylvania; Wei Wang, Queens University; and Wenyu • Andrew Foote, US Census Bureau, and Kevin M. Stange, University of Michigan and NBER, “Attrition from Wang, Indiana University, “Dissecting Bankruptcy Frictions” Administrative Data: Problems and Solutions with an Application to Higher Education”

• Francesco D’Acunto, Boston College; Ulrike Malmendier, University of California, Berkeley and NBER; and Michael • Christopher Neilson and Franco A. Calle, Princeton University, and Sebastian Gallegos, Inter-American Development Weber, University of Chicago and NBER, “Gender Roles Distort Women’s Economic Outlook” Bank, “Screening and Recruiting Talent at Teacher Colleges Using Pre-College Academic Achievement”

Summaries of these papers are at www.nber.org/conferences/2019/CFf19/summary.html

40 NBER Reporter • No 4, December 2019 NBER Reporter • No. 4, December 2019 41 • Kelli A. Bird and Benjamin L. Castleman, University of Virginia; Jeffrey T. Denning, Brigham Young University; • Emily Breza, Harvard University and NBER; Supreet Kaur, University of California, Berkeley and NBER; and Yogita Joshua Goodman, Brandeis University and NBER; Cait Lamberton, University of Pittsburgh; and Kelly Ochs Shamdasani, University of Pittsburgh, “Labor Rationing: A Revealed Preference Approach from Hiring Shocks” Rosinger, Pennsylvania State University, “Nudging at Scale: Experimental Evidence from FAFSA Completion Campaigns” (NBER Working Paper 26158) • Matti Mitrunen, University of Chicago, “Structural Change and Intergenerational Mobility: Evidence from the Finnish War Reparations” • Philip Oreopoulos, University of Toronto and NBER, and Uros Petronijevic, York University, “The Remarkable Unresponsiveness of College Students to Nudging and What We Can Learn from It” (NBER Working Paper 26059) • Dennis Egger and Michael W. Walker, University of California, Berkeley; Johannes Haushofer, Princeton University and NBER; Paul Niehaus, University of California, San Diego and NBER; Edward Miguel, “General Equilibrium • Phillip B. Levine, Wellesley College and NBER; Jennifer Ma, College Board; and Lauren C. Russell, University of Welfare Effects of Cash Transfers: Experimental Evidence from Kenya” Pennsylvania, “Do College Applicants Respond to Changes in Sticker Prices Even When They Don’t Matter?” • Monica Martinez-Bravo and Andreas Stegmann, Centro de Estudios Monetarios y Financieros (CEMFI), “In Vaccines • Eric Brunner and Stephen Ross, University of Connecticut, and Shaun Dougherty, Vanderbilt University, “The Effects We Trust? The Effects of the CIA’s Vaccine Ruse on Immunization in Pakistan” of Career and Technical Education: Evidence from the Connecticut Technical High School System” Summaries of these papers are at www.nber.org/conferences/2019/DEVf19/summary.html • Barbara Biasi, Yale University and NBER, “Higher Salaries or Higher Pensions? Inferring Preferences from Teachers’ Retirement Behavior” Summaries of these papers are at www.nber.org/conferences/2019/EDf19/summary.html Health Care

Members of the NBER’s Health Care Program met December 6 in Cambridge. Program Director Jonathan Gruber of MIT and Development Economics/BREAD Research Associates Leemore Dafny of Harvard University, Benjamin R. Handel of the University of California, Berkeley, and Neale Mahoney of the University of Chicago organized the meeting. These researchers’ papers were presented and discussed:

A joint meeting of the NBER’s Development Economics Program and BREAD (Bureau for Research and Economic Analysis of • Shooshan Danagoulian, Wayne State University; Daniel S. Grossman, West Virginia University; and David Slusky, Development) was held November 22–23 in Cambridge. Oriana Bandiera and Robin Burgess of the London School of Economics, University of Kansas, “Office Visits Preventing Emergency Room Visits: Evidence from the Flint Water Switch” Research Associates Melissa Dell of Harvard University, Edward Miguel of the University of California, Berkeley and Dean Yang of the University of Michigan, and Program Directors Seema Jayachandran of Northwestern University and Benjamin A. Olken of • Liran Einav, Stanford University and NBER; Amy Finkelstein, MIT and NBER; Yunan Ji, Harvard University; and MIT organized the meeting. These researchers’ papers were presented and discussed: Neale Mahoney, “Voluntary Regulation: Evidence from Medicare Payment Reform”

• Katherine Casey, Stanford University and NBER, and Niccoló Meriggi and Abou Bakarr Kamara, International • Pierre-Thomas Léger and Wu Jiashan, University of Illinois at Chicago, and Robert Town, University of Texas, Austin Growth Centre, “An Experiment in Candidate Selection” (NBER Working Paper 26160) and NBER, “A Theory of Geographic Variations in Medical Care”

• Siddharth E. George, Harvard University, “Like Father, Like Son? The Effect of Political Dynasties on Economic • Richard Domurat, University of California, Los Angeles; Isaac Menashe, Covered California; and Wesley Yin, Development” University of California, Los Angeles and NBER, “The Role of Behavioral Frictions in Health Insurance Marketplace Enrollment and Risk: Evidence from a Field Experiment” (NBER Working Paper 26153) • Vittorio Bassi, University of Southern California; Tommaso Porzio, Columbia University; Ritwika Sen, Northwestern University; and Raffaela Muoio and Esau Tugume, BRAC Uganda, “Achieving Scale Collectively” • Diane E. Alexander, Federal Reserve Bank of Chicago, and Molly Schnell, Northwestern University and NBER, “The Impacts of Physician Payments on Patient Access, Use, and Health” (NBER Working Paper 26095) • Clare Leaver, University of Oxford; Owen Ozier, The World Bank; Pieter M. Serneels, University of East Anglia; and Andrew F. Zeitlin, Georgetown University, “Recruitment, Effort, and Retention Effects of Performance Contracts for • Abby E. Alpert, University of Pennsylvania and NBER; William N. Evans and Ethan Lieber, University of Notre Dame Civil Servants: Experimental Evidence from Rwandan Primary Schools” and NBER; and David Powell, RAND Corporation, “Origins of the Opioid Crisis and Its Enduring Impacts”

• Richard Hornbeck, University of Chicago and NBER, and Martin Rotemberg, New York University, “Railroads, • Benjamin R. Handel and Jonathan T. Kolstad, University of California, Berkeley and NBER, and Thomas Minten Reallocation, and the Rise of American Manufacturing” and Johannes Spinnewijn, London School of Economics, “The Social Determinants of Choice Quality: Evidence from Health Insurance in the Netherlands” • Adam Aberrra and Matthieu Chemin, McGill University, “Does Legal Representation Increase Investment? Evidence from a Field Experiment in Kenya” • Yiqun Chen, Stanford University, and Petra Persson and Maria Polyakova, Stanford University and NBER, “The Roots of Health Inequality and the Value of Intra-Family Expertise” (NBER Working Paper 25618) • Abhijit Banerjee and Esther Duflo, MIT and NBER; Arun G. Chandrasekhar, Stanford University and NBER; and Matthew Jackson, Stanford University, “Changes in Social Network Structure in Response to Exposure to Formal Credit Summaries of these papers are at www.nber.org/conferences/2019/HCf19/summary.html Markets”

42 NBER Reporter • No 4, December 2019 NBER Reporter • No. 4, December 2019 43 Entrepreneurship • Bradley Setzler, University of Chicago, and Felix Tintelnot, University of Chicago and NBER, “The Effects of Foreign Multinationals on Workers and Firms in the United States” (NBER Working Paper 26149)

Members of the NBER’s Entrepreneurship Working Group met December 6 in Cambridge. Program Director Josh Lerner • Alejandro G. Graziano, University of Maryland; Kyle Handley, University of Michigan and NBER; and Nuno Limão, of Harvard University and Research Associate David T. Robinson of Duke University organized the meeting. These researchers’ University of Maryland and NBER, “Brexit Uncertainty and Trade Disintegration” (NBER Working Paper 25334) papers were presented and discussed: • Vanessa I. Alviarez, University of British Columbia; Javier Cravino, University of Michigan and NBER; and Natalia • Kristoph Kleiner and Isaac Hacamo, Indiana University, “Confidence Spillovers in Competitive Environments: Ramondo, University of California, San Diego and NBER, “Accounting for Cross-Country Income Differences: New Evidence from Entrepreneurship” Evidence from Multinational Firms”

• Johan Hombert, HEC Paris, and Adrien Matray, Princeton University, “Technology Boom, Labor Reallocation, and • Wulong Gu, Statistics Canada; Alla Lileeva, York University; and Daniel Trefler, University of Toronto and NBER, Human Capital Depreciation” “Global Sourcing from Low-Wage Countries: Implications for R&D and Employment”

• Barbara Biasi, Yale University and NBER, and Song Ma, Yale University, “The Education-Innovation Gap” Summaries of these papers are at www.nber.org/conferences/2019/ITIf19/summary.html

• Thomas F. Hellmann, University of Oxford and NBER, and Nir Vulkan, University of Oxford, “Be Careful What You Ask For: Fundraising Strategies in Equity Crowdfunding” (NBER Working Paper 26275)

• Olav Sorenson and Rodrigo Canales, Yale University; Michael Dahl, Aarhus University; and M. Diane Burton, Cornell University, “Do Startup Employees Earn More in the Long Run?”

• Juanita González-Uribe, London School of Economics, and Santiago Reyes, Inter-American Development Bank, “Identifying and Boosting “Gazelles”: Evidence from Business Accelerators”

• Aymeric Bellon, University of Pennsylvania; J. Anthony Cookson, University of Colorado; Erik P. Gilje, University of Pennsylvania and NBER; and Rawley Z. Heimer, Boston College, “Personal Wealth and Self-Employment”

Summaries of these papers are at www.nber.org/conferences/2019/ENTf19/summary.html

International Trade and Investment

Members of the NBER’s International Trade and Investment Program met December 6–7 at Stanford University. Program Director Stephen J. Redding of Princeton University organized the meeting. These researchers’ papers were presented and discussed:

• Dominick G. Bartelme and Ting Lan, University of Michigan, and Andrei A. Levchenko, University of Michigan and NBER, “Specialization, Market Access and Real Income”

• Joseph S. Shapiro, University of California, Berkeley and NBER, “The Environmental Bias of Trade Policy”

• Andrés Rodríguez-Clare, University of California, Berkeley and NBER; Mauricio Ulate, Federal Reserve Bank of San Francisco; and José P. Vásquez, University of California, Berkeley, “New-Keynesian Trade: Understanding the Employment and Welfare Effects of Sector-Level Shocks”

• Nezih Guner, CEMFI; Alessandro Ruggieri, Universitat Autònoma de Barcelona and Barcelona GSE; and James R. Tybout, Pennsylvania State University and NBER, “Trade, Offshoring, and the Job Ladder”

• Costas Arkolakis and Michael Peters, Yale University and NBER, and Sun K. Lee, Columbia University, “European Immigrants and the United States’ Rise to the Technological Frontier in the 19th Century”

44 NBER Reporter • No 4, December 2019 NBER Reporter • No. 4, December 2019 45 Innovation Policy and the Economy, volume 20 NBER Books Innovation and the Policy Economy Innovation Policy and the Economy, Volume 20 Edited by Josh Lerner and Scott Stern The chapters in this twentieth volume of Innovation Policy and the Economy Innovation Policy present research on the interactions among public policy, the innovation Josh Lerner and Scott Stern, editors process, and the economy. One explores changes in the ability of the U.S. to attract talented foreign workers and the role of sponsoring institutions in Productivity in Higher Education shaping immigration policy. Another explains how the division of innovative and the Economy labor between research universities and corporate labs affected productivity growth and the transformation of knowledge into new products and pro- cesses. A third reviews different innovation policies and their performance Volume 20 The chapters in this 20th volume of of ininnovation the pharmaceutical sector. policies Next is a chapter onand the effects their of competition performance policy on innovation, “creative destruction,” and economic growth. A fifth Innovation Policy and the Economy present in chapterthe studiespharmaceutical how experimental policy design sector. can be a cost-effective Next way is a chap- Caroline M. Hoxby and Kevin Stange, editors to attain program goals. The last chapter examines geographic disparities Edited by Josh Lerner and Scott Stern research on the interactions among public terin oninnovation, the joblessness, effects and technological of dynamismcompetition and studies how policy 20 vol. on reallocation of grants and geographically targeted entrepreneurship policy The Gift of Global Talent: Innovation Policy and the Economy could affect labor supply and welfare. policy, the innovation process, and the econ- innovation, “creative destruction,” and eco- The Changing Structure of American Innovation: Some Cautionary Remarks Josh Lerner is the Jacob H. Schiff Professor of Investment Banking and Head for Economic Growth How do the benefits of higher education market forces. The analyses recognize five key omy. One explores changes in the ability nomicof the Entrepreneurial growth. Management A Unit fifth at Harvard Business chapter School, and a focuses on

Lerner and Stern,Lerner editors The Alignment of Innovation Policy and Social Welfare: Evidence from research associate and co-director of the Productivity, Innovation, and Entrepre- Pharmaceuticals compare with its costs, and how does this com- challenges to assessing productivity in higher of the US to attract talented foreign work- howneurship experimental Program at the NBER. Scott Stern policy is the David Sarnoff design Professor of can be a Management in the Technological Innovation, Entrepreneurship, and Strategic Antitrust and Innovation: Welcoming and Protecting Disruption parison vary across individuals and institutions? education: the potential for multiple student ers and the role of sponsoring institutions cost-effectiveManagement Group at the MIT Sloanway School to of Management,attain and aprogram research goals. associate and director of the Innovation Policy Working Group at the NBER. Experimental Innovation Policy

These questions are fundamental to quantify- outcomes in terms of skills, earnings, invention, in shaping immigration policy. Another The last chapter examines geographic dis- The Spatial Mismatch between Innovation and Joblessness ing the productivity of the education sector. and employment; the fact that colleges and explains how the division of innovative labor paritiesNBER Innovation in Policyinnovation, and the Economy Series joblessness, and tech- Productivity in Higher Education uses rich and universities are “multiproduct” firms that con- between research universities and corporate nological dynamism, and studies how reallo- novel administrative data, modern econometric duct varied activities across many domains; the labs affected productivity growth and the cation of grants and geographically targeted methods, and deep institutional understand- fact that students select which school to attend transformation of knowledge into new prod- entrepreneurship policy could affect labor ing to explore productivity issues in the educa- based in part on their aptitude; the difficulty of ucts and processes. A third reviews a variety supply and welfare. tion sector. The authors examine the returns to attributing outcomes to individual institutions The University of Chicago Press undergraduate education, differences in costs when students attend more than one; and the www.press.uchicago.edu chicago by major, the productivity of for-profit schools, possibility that some of the benefits of higher the productivity of various types of faculty, the education may arise from the system as a whole effects of online education on the higher edu- rather than from a single institution. The find- cation market, and the ways in which the pro- ings and the approaches illustrated can facilitate ductivity of different institutions responds to decision-making processes in higher education.

Social Security Programs and Retirement around the World: Working Longer

Courtney C. Coile, Kevin Milligan, and David A. Wise, editors

Developed countries during the last two documents trends in participation and employ- decades have experienced a long-term decline ment, and explores reasons for the rising partici- in men’s labor force participation at older ages, pation rates of older workers. The chapters use a followed by a more recent pattern of sharply common template for analysis which facilitates rising participation rates. Participation rates for comparison of results across countries. Using women at older ages also have been rising. What within-country natural experiments and cross- explains the trend reversal for men, the evolving country comparisons, the researchers study the pattern for women, and the differences in these impact of improving health and education, trends across countries? The answers to these changes in the occupation mix, the retirement questions are pivotal as countries seek solutions incentives of social security programs, and the to the fiscal and retirement security challenges emergence of women in the workplace. The posed by longer lifespans. This eighth volume findings suggest that social security reforms and of the International Social Security project, other factors such as the movement of women which compares the social security and retire- into the labor force have played an important ment experiences of 12 developed countries, role in labor force participation trends.

46 NBER Reporter • No. 4, December 2019 NBER Reporter • No. 4, December 2019 47 Nonprofit Org. NBER U.S. Postage Reporter PAID NATIONAL BUREAU OF ECONOMIC RESEARCH National Bureau of Economic Research 1050 Massachusetts Avenue Cambridge, Massachusetts 02138-5398 (617) 868-3900

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