NBER Reporter NATIONAL BUREAU OF ECONOMIC RESEARCH
Reporter OnLine at: www.nber.org/reporter 2012 Number 1
Program Report
IN THIS ISSUE
Program Report The Changing Focus of Public Public Economics 1 Economics Research, 1980–2010 Research Summaries Private Health Insurance Markets 7 Transfer of Knowledge across Countries 10 Raj Chetty and Amy Finkelstein* Inflation Forecasting 13 Wealth After Retirement 16 The NBER’s Program on Public Economics (PE) has covered a very wide range of topics since the last program report six years ago. Rather than NBER Profiles 19 attempting to summarize the entire corpus of work that has been done by Conferences 21 this program in the past few years, this report provides a bird’s eye view NBER News 25 of some of the major changes in the field from two perspectives. First, we Program and Working Group Meetings 29 quantify the main trends in public finance research at the NBER over the Bureau Books 35 last thirty years, drawing on statistics from the database of NBER Working Papers. Second, we qualitatively summarize some of the emerging themes of recent research, both in terms of topics and methods. A Statistical Perspective
The Public Economics Program began as the Business Taxation and Finance Program, which held its first meeting under the direction of David Bradford in December 1977. It was renamed the Taxation Program in 1980, to reflect the broader research interests of its affiliated researchers. To recog- nize the importance of expenditure as well as tax research, the program was renamed “Public Economics” in 1991, when James Poterba succeeded David Bradford as Program Director. In the last two decades, the research conducted by the Public Economics Program has changed dramatically in volume, methodology, and topics. To broadly characterize some of the main trends, we downloaded all of the Working Papers in the Taxation Program in 1990 and in the Public Economics Program in 2000 and 2010, and classified them in various ways, which we summarize in Table 1, on page 3.
*Chetty and Finkelstein direct the NBER’s Program on Public Economics. Chetty is a professor of economics at Harvard University. Finkelstein is a pro- fessor of economics at MIT. They are grateful to Annetta Zhou for excellent research assistance. The numbers in parentheses throughout this report refer to NBER Working Papers.
NBER Reporter • 2012 Number 1 The number of Public Economics (PE) papers per year has grown over time from 55 in 1990 to NBER Reporter 183 in 2010. This appears to primarily reflect the growth in the number of Program mem- bers; over the same period, the total number of NBER affiliates has also increased; and the Public Economics share of NBER Working Papers has The National Bureau of Economic Research is a private, nonprofit research orga- not shown any pronounced trend. However, the nization founded in 1920 and devoted to objective quantitative analysis of the American economy. Its officers and board of directors are: activities of the PE Program have branched out in part to related programs, including Children, President and Chief Executive Officer — James M. Poterba Controller — Kelly Horak the Economics of Education, Aging, Health Economics, and Health Care. The papers in these BOARD OF DIRECTORS programs collectively account for over 40 percent Chairman — Kathleen B. Cooper of NBER Working Papers in 2010. Vice Chairman — Martin B. Zimmerman The typical methodology used in papers in Treasurer — Robert Mednick the PE Program also has changed over time. In DIRECTORS AT LARGE 1990, about 30 percent of papers listed in PE Peter Aldrich Mohamed El-Erian Michael H. Moskow were purely empirical; by 2010 that number had Elizabeth E. Bailey Linda Ewing Alicia H. Munnell grown to about 50 percent. Much of this growth John Herron Biggs Jacob A. Frenkel Robert T. Parry John S. Clarkeson Judith M. Gueron James M. Poterba is likely due to the greater availability of micro Don R. Conlan Robert S. Hamada John S. Reed data that permit rigorous empirical analyses of Kathleen B. Cooper Peter Blair Henry Marina v. N. Whitman questions that cannot be answered purely based Charles H. Dallara Karen N. Horn Martin B. Zimmerman George C. Eads John Lipsky on theory. We expect this growth to be even Jessica P. Einhorn Laurence H. Meyer more rapid in the coming years, as researchers gain access to large administrative panel data- DIRECTORS BY UNIVERSITY APPOINTMENT bases that permit even finer analysis. George Akerlof, California, Berkeley Bruce Hansen, Wisconsin The topics analyzed by public economists Jagdish W. Bhagwati, Columbia Marjorie B. McElroy, Duke Timothy Bresnahan, Stanford Joel Mokyr, Northwestern have changed as much as the methods used. Alan V. Deardorff, Michigan Andrew Postlewaite, Pennsylvania Although public finance traditionally has been Ray C. Fair, Yale Uwe E. Reinhardt, Princeton associated with government spending and tax- Franklin Fisher, MIT Craig Swan, Minnesota John P. Gould, Chicago David B. Yoffie, Harvard ation, our analysis of papers listed in the PE Mark Grinblatt, California, Los Angeles Program shows a marked trend over time toward DIRECTORS BY APPOINTMENT OF OTHER ORGANIZATIONS a broader definition of what constitutes pub- Jean Paul Chavas, Agricultural and Applied Economics Association lic finance. The share of papers listed in the PE Martin Gruber, American Finance Association Program that are not directly related to govern- Ellen Hughes-Cromwick, National Association for Business Economics ment spending or taxation rose from 30 percent Christopher Carroll, American Statistical Association Thea Lee, American Federation of Labor and in 1990 to over 60 percent in 2010. Common Congress of Industrial Organizations topics for these other papers include macro- William W. Lewis, Committee for Economic Development economics, regulation (environmental, housing, Robert Mednick, American Institute of Certified Public Accountants Alan L. Olmstead, Economic History Association financial and so on), and papers on educational John J. Siegfried, American Economic Association productivity and outcomes. Another metric of Gregor W. Smith, Canadian Economics Association this broadening of focus is the increasing share Bart van Ark, The Conference Board of PE papers that are cross-listed in another field, The NBER depends on funding from individuals, corporations, and private foun- from about 30 percent in 1990 to about 90 per- dations to maintain its independence and its flexibility in choosing its research cent in 2010. activities. Inquiries concerning contributions may be addressed to James M. Poterba, President & CEO, NBER 1050 Massachusetts Avenue, Cambridge, MA There also has been a marked shift in 02138-5398. All contributions to the NBER are tax deductible. research from the analysis of taxation to the The Reporter is issued for informational purposes and has not been reviewed by analysis of government expenditures. In 1990, the Board of Directors of the NBER. It is not copyrighted and can be freely repro- less than 10 percent of PE papers on taxes or duced with appropriate attribution of source. Please provide the NBER’s Public spending dealt exclusively with spending; in Information Department with copies of anything reproduced. 2010 that number was about 55 percent. Part of Requests for subscriptions, changes of address, and cancellations should be sent this increase is related to the fact that the nature to Reporter, National Bureau of Economic Research, Inc., 1050 Massachusetts Avenue, Cambridge, MA 02138-5398. Please include the current mailing label. of government expenditure today is more ame- nable to economic analysis: economists have less
2 NBER Reporter • 2012 Number 1 Table 1 — Overview
1990 2000 2010 Total # of NBER Working Papers 398 665 1025 Total # of Working Papers in Public Economics 55 153 183 Share of Working Papers in Public Economics 13.8% 23.0% 17.9% Public Economics Working Papers by Methodology 1990 2000 2010 Empirical 29.1% 46.4% 52.5% Theory 38.2% 37.3% 30.1% Both 29.1% 11.8% 5.5% Other (survey of the literature, research methodology, etc) 3.6% 4.6% 12.1% Public Economics Working Papers by Topic 1990 2000 2010 Tax 63.6% 28.1% 15.3% Spending 5.5% 13.7% 20.8% Tax and Spending 0.0% 7.8% 1.1% Other (Education, Regulation, etc)* 30.9% 50.3% 62.8% * WPs on education factors and their productivity, such as teachers’ value added and school choice mechanisms, are categorized under “other” while WPs on the financing of public education are categorized under “spending”. Public Economics Working Papers on Taxation: Corporate vs. Individual 1990 2000 2010 Individual 47.1% 79.2% 88.9% Corporate 41.2% 13.2% 7.4% Both 11.8% 7.5% 3.7% to say about the best way to build bridges ation is thus an area that appears ripe for make we try to list a few illustrative exam- than about how to design social insur- additional work using modern theoretical ples from recent working papers, but do ance programs. But another likely rea- and empirical methods. not attempt a comprehensive reference list. son for the shift is that the varied nature We apologize to researchers whose work of expenditure programs at the state and A Qualitative Perspective and topics of focus we have been unable local level creates many important and to cover here because of space constraints. interesting questions that researchers can While the descriptive statistics above investigate using modern quasi-experi- provide a broad sense of the major shifts Connecting Theory to Evidence mental techniques. in the field, there are many thematic and There also have been important methodological changes that require a Prompted by the growth in empirical changes within the sub-field of taxation. more nuanced reading of the literature. We work documented above, researchers more Most notably, research has focused increas- briefly review what we view as some of the recently have begun to seek methods of ingly on issues of individual taxation. The most important themes that have emerged connecting empirical findings back to the share of tax-related papers that deal exclu- over the past decade of work and high- theoretical models that formed the core of sively with individual taxation has risen light areas that are likely to be very active public finance research in the 1970s and from almost 50 percent in 1990 to about in the coming years. Naturally, the sum- 1980s. The explosion in empirical research 90 percent in 2010. We believe that part maries below neglect a far larger fraction in the 1990s and 2000s was largely driven of this trend is related to the availability of of research than they cover; no brief review by studies that documented the causal excellent microdata and identification strat- could do justice to the breadth and depth impacts of tax policies or expenditure pro- egies that are useful in analyzing individual of work done by the PE group over the past grams on economic behavior. For instance, tax and spending programs. Corporate tax- five years. For most of the major points we a large empirical literature estimated the
NBER Reporter • 2012 Number 1 3 impacts of income taxation on labor supply by policy changes in a variety of settings. as asymmetric information or externalities and reported taxable income (7512, 15012, The second is to derive formulas for poli- due to incomplete markets — behavioral 15583). These studies generally have found cies that meet specified criteria — such models open up a new class of potential significant impacts of taxes on reported tax- as maximizing individuals’ utility or wel- motives and considerations for government able income, particularly for high income fare — from standard theoretical models policy. When individuals do not optimize, individuals and over longer horizons when that can be expressed in terms of the high- there may be a rationale for government individuals have had sufficient time to level reduced-form parameters estimated intervention even in well-functioning mar- adjust labor supply. Estimates of the tax- in modern empirical work. This latter kets, for instance by requiring that indi- able income elasticity vary, but are generally technique, which has come to be known viduals who underestimate risks buy health between 0.25 and 0.5 excluding top income as the “sufficient statistic” approach, is less insurance or by forcing myopic agents to earners (15616). An equally large num- dependent on the specification of a par- save for retirement. ber of studies have measured the impacts ticular model of underlying behavior, but A key challenge in this nascent litera- of social insurance and welfare programs is more limited in the set of questions it ture has been to understand how to do wel- on many behaviors (12865, 14306, 15589, can answer. fare analysis when agents do not optimize. 17049). Again, there is consistent evidence Both of these methodologies have Public economists have leaned very heav- that these government expenditure pro- allowed PE researchers to start to assess ily upon the tools of revealed preference grams affect behaviors around labor supply, how various policies affect a number of in order to analyze policy. By recovering savings, and healthcare expenditures. Many criteria that might be used for policy anal- individual preferences from choices, one of these studies used quasi-experimental ysis. For instance, researchers have pro- can proceed to identify policies that max- methods that permit convincing identifica- vided numerical characterizations of how imize the individual’s welfare. But when tion of the causal impacts of policies under a utilitarian social welfare criterion would individuals do not optimize, their choices relatively weak assumptions. be affected by various degrees of progres- no longer reveal their true preferences, This body of empirical work has sivity of the income tax schedule (7628, and it becomes much less clear what the advanced enormously (and continues to 7708, 17616), of the level of unemploy- government’s objective should be. Recent advance) our understanding of policy ment benefits that maximizes individuals’ work has made several productive strides impacts. For instance, several studies have expected utility (12618, 13967), of the in tackling this issue, ranging from defin- demonstrated convincingly that social tax rate on capital gains that maximizes ing welfare criteria when agents make spe- security programs have significant effects net surplus (17642), and of the welfare cific mistakes (13976, 15328) to devel- on retirement decisions (7830, 8658, costs of adverse selection in health insur- oping robust methods of welfare analysis 17320). Yet in many cases, it has been dif- ance and annuity markets (13228, 14414). that acknowledge choice inconsistencies ficult to translate these findings into assess- These approaches have in turn helped to (13330, 13737). ments of the efficiency or other economic refocus the empirical literature on esti- Partly because welfare analysis in effects associated with social security pro- mating the parameters that matter most behavioral models is complex, much of the grams. Theoretical studies on social secu- for policy analysis. There are many areas growth in the behavioral public econom- rity (10260, 16503) have characterized the of the field in which work connecting the- ics literature has been in positive empirical efficiency consequences of program design ory to data is only now beginning, such as work. A recurring finding of these studies is under specific assumptions about various the analysis of social security and disabil- that while traditional economic incentives parameters. However, the implications of ity insurance programs or the analysis of do matter on the margin, other aspects of the empirical findings for the parameters education policies. We expect much more policies — such as framing, information, that entered these theoretical models were research in these areas using the tools that or the decision environment — often have often unclear. have been developed in recent research. much larger impacts. Researchers have Recent work in the PE group has demonstrated that behavioral consider- connected the earlier theoretical liter- Behavioral Public Finance ations play a first-order role in an array of ature with modern empirical evidence settings, including the role of defaults in more directly. Researchers used two types Public economics has been quick to retirement savings contributions (12009, of methodology to accomplish this goal. draw upon the insights of other fields and 13352, 14859), the role of salience in tax The first is to build structural models that to understand their implications for policy policies (12924, 13330), and the impacts of are calibrated to match empirical esti- analysis. One of the most important trans- information provision tax and transfer pro- mates (9183, 13228, 13375, 17338) and formations in public economics over the grams (14836, 17287). then to analyze policy using these mod- past decade has been the incorporation of While behavioral considerations play els. This structural approach offers a ver- lessons from behavioral economics. While an increasingly important role in pub- satile tool for making quantitative pre- traditional public economics often starts lic finance research, much remains to be dictions about how particular measures from potential market failures that might learned before researchers have a uni- of household welfare could be affected motivate government intervention — such fied framework for policy analysis when
4 NBER Reporter • 2012 Number1 agents do not optimize. We expect to see dynamic models more closely to empirical instance, recent work has tested theoreti- much more research in this area in the evidence, as is now common in the analy- cal predictions about observational learn- coming years. sis of static problems. ing (13516), analyzed whether neoclassical models of tax evasion are good descriptions New Dynamic Public Finance Lab and Field Experiments of taxpayer behavior (15769), and investi- gated whether individuals’ utility depends Just as public economists have drawn While a great deal of the new empiri- upon absolute or relative income (16396). inspiration from work in behavioral eco- cal work in public finance exploits large Other studies have estimated the param- nomics, research on dynamic macroeco- observational datasets, public economists eters needed to calibrate models for policy nomic models also has had a significant also run experiments and collect new data analysis, such as the price elasticity of chari- influence on the field. While many of to use in analyzing economic policies. An table giving (12338). the theoretical models studied by public active literature uses lab experiments to economists in the 1980s and 1990s were investigate economic decision making in Social Insurance static, macroeconomists were developing a variety of domains. These include clas- dynamic models with forward-looking sic topics such as public goods (15967) The growth in research on expendi- agents who anticipated changes in future and the endowment effect, and reference- ture programs documented above is driven government policies. This style of work dependent behavior (16715), as well as primarily by research on major social insur- now has informed research on public newer areas of inquiry such as the impact ance programs, particularly Social Security finance, with a large and robust litera- of matching grants on charitable giving and Disability Insurance, Medicare and ture dealing with policy problems such as (13728) and the effect of campaign finance Medicaid, and Unemployment Insurance. capital income taxation and social insur- regulations (17384). Other recent work has These programs make up over half of fed- ance in dynamic models. These problems tested the internal consistency of economic eral expenditures and are expected to grow are technically very challenging, because choices and has attempted to explain which rapidly over the coming decades as the baby dynamic models are generally much less types of agents are most rational in their boomers age and medical costs continue to tractable than static models. behavior (16791). grow. In the 1980s and early 1990s, empiri- Researchers have made considerable Researchers also have turned to field cal work tended to focus on the distortion- progress in facing these technical chal- experiments to tackle a broad range of ary consequences of social insurance pro- lenges and have begun to obtain some questions because of concerns about grams, particularly for labor supply, but interesting findings. For example, several the external validity of lab experiments also for other behaviors such as savings studies have suggested that there may be (12992, 14356). Field experiments have and health expenditures. While important a role for capital taxation even in infi- been used to analyze the role of ballot advances continue to be made in this area, nite-horizon economics, contrary to the secrecy in voter turnout (17673), motives we have also seen an increasing focus on results of classic papers that made stron- for charitable giving (17648), the long- formalizing and quantifying the benefits ger assumptions about the set of policy term impacts of early childhood educa- of these programs. For example, recent instruments available to the government tion (16381, 17533), the effects of infor- work has examined the potential benefits (10792, 16619, 13720, 17642). Other mation provision on Medicare Part D that unemployment insurance may provide work has shown that in an environment prescription drug insurance plan choices by giving unemployed workers access to without liquidity constraints, the path of (17410), and the consequences of using liquidity (11689, 11709, 13967); one of the unemployment benefits that maximizes various strategies to address the needs of central findings of this new vein of research expected utility is constant over time poor individuals in developing countries is that access to liquidity during unemploy- (11689). (15980). The breadth of these studies, rel- ment may be one of the most important An interesting direction for further ative to traditional public finance topics, functions of unemployment insurance. In work in this area is combining the insights illustrates both the expansion of the field the area of health insurance, while interest of behavioral models with dynamic mod- as discussed above and the fact that field continues in the impact of Medicare and els. Most dynamic models assume that experiments allow researchers to tackle Medicaid on health spending, research also agents are forward looking, rational questions that could not be answered examines the potential benefits of these agents, contrary to the lessons from the with standard observational datasets. programs not only for health outcomes behavioral literature summarized above. As with empirical work using obser- but, increasingly, for risk spreading (16155, One early example along these lines is vational data, recent research has begun 17190), where evidence suggests health work showing that constraining agent’s to integrate more closely the findings insurance may play an important role in savings decisions when individuals have from experiments with theoretical mod- reducing the risk of large out-of-pocket self-control problems can increase utility els (17047). Several studies involve the medical expenditures or medical debts. (10151). Another interesting direction design of experiments that directly test Another welcome development in for further work will be to tie the new the predictions of standard models. For this area has been the creation of compel-
NBER Reporter • 2012 Number 1 5 ling research designs to use in investigating Several papers include examples in which to public expenditures on economic activ- the impacts of uniform national programs. rather than adverse selection — where ity, and a framework with which to use Historically, much of the empirical work on those who have private information that such estimates to try to inform one’s sense social insurance has focused on unemploy- they are at high risk select more insur- of the standard closed-economy aggregate ment insurance or Medicaid, both of which ance — there is evidence of advantageous multiplier. The program that day also fea- are state level programs, therefore offering selection — in which those who have pri- tured several papers that estimated the potential “natural experiments” as differ- vate information that they are at low risk fiscal multiplier using quasi-experimen- ent states have adjusted these programs in will select more insurance. This has raised tal designs, such as those induced by the different ways at different points in time. the possibility that there may be insur- stimulus bill (the American Reinvestment Much of the empirical work on important ance markets in which private information and Recovery Act), by the changes in fed- national social insurance programs — such results in too much rather than too little eral spending in localities brought about as Social Security, Medicare, and Disability insurance coverage. by decennial updates to the population Insurance — was limited to time-series estimates, and by the performance of state comparisons as the programs expanded or Research influences from the pension fund investments. Other program to cross-sectional comparisons about indi- financial crisis and current meetings have featured NBER Working viduals whose incomes gave them access to macroeconomic events Papers related to the impact of fiscal stim- different benefit levels. Increasingly, how- ulus as well, including an analysis of the ever, researchers have been able to draw on One of the strengths of the PE pro- impact of the “Cash for Clunkers” pro- other empirical strategies — sometimes in gram is that the research it produces gram on the economy (16351) which other countries and often drawing on large quickly responds to important economic concluded that almost all of the addi- administrative databases — to shed light on events. Recently, the financial crisis has tional car sales induced by this program the impact of these important social insur- touched almost all aspects of American represented moving forward sales that ance programs. In the United States, for life and society. Thus, we have seen a otherwise would have occurred within example, recent studies have used the dis- remarkably quick and direct influence the year anyway. continuity in Medicare eligibility at age of the macroeconomic situation and the The interest in analyzing fiscal stim- 65 to study the impact of Medicare on public policy questions it has generated ulus is one example of a broader trend health care utilization and health outcomes on research in the PE program. Two top- toward analyzing issues that have been (13668, 10365). One paper presented at ics in particular have generated such a tackled historically using macroeconomic the Spring 2011 NBER Public Economics concentrated burst of related research approaches rather than microeconometric Program Meeting uses the quasi-random that we organized mini-symposia around methods. Another example of the use of assignment of disability applicants to exam- the topics. quasi-experimental methods is work esti- iners with different degrees of leniency in One research topic concerns the vary- mating the marginal propensity to con- judging disability to examine the impact of ing economic effects of unemployment sume out of windfall cash grants (16684, disability insurance receipt on labor sup- insurance over the business cycle (16526, 14753). ply.1 The authors find that the receipt of 17173, 17534), and the potential implica- While the character of public eco- disability insurance reduces labor force par- tions of such variation for program design. nomics research at the NBER has ticipation more for those who are estimated These studies have analyzed, among other changed dramatically over the past three to have less severe disabilities. things, the extent to which unemploy- decades — as any healthy and active area In addition to examining the impacts ment benefit extensions have increased of research should — the fundamental of social insurance, a growing body of unemployment rates, and whether this goals of the field remain much the same: empirical research has investigated some effect is smaller or larger in recessions. In to provide careful, rigorous economic of the underlying economic rationales for the spring of 2011, we organized a sympo- analysis that bears on the most important these social insurance programs, focusing sium around this topic. government policy questions of the time. particularly on the existence and nature Another question concerns the The NBER’s PE program has made sig- of selection in private insurance markets nature, mechanism, and magnitude of nificant contributions toward achieving for annuities and health insurance (12289, the fiscal multiplier. One day of the July this goal over the past decades and is well 14414, 15326) as well as the impact of 2011 Summer Institute was devoted to poised to continue to do so in the years public policy in selection markets (16977). six papers on this topic. Mankiw and to come. The emphasis on developing techniques for Weinzierl (17029) provided a theoreti- detecting selection and then applying them cal framework for analyzing the optimal 1 Nicole Maestas, Kathleen Mullen, has generated interesting and at times sur- response of monetary and fiscal policy to and Alexander Strand, “Does Disability prising insights about the nature of selec- aggregate demand shocks. Nakamura and Insurance Receipt Discourage Work? Using tion and the implications for public policy Steinsson (17391) provided empirical Examiner Assignment to Estimate Causal in annuity and health insurance markets. estimates of the impact of regional shocks Effects of SSDI Receipt”.
6 NBER Reporter • 2012 Number1 Research Summaries
Private Health Insurance Markets
Leemore Dafny*
Private health insurance plays a piv- market, particularly for firms that operate only at the sites served by a concentrated otal role in the U.S. healthcare system. at multiple locations. insurance market. I do not find any evi- Private insurers account for one out I use these data — henceforth dence that firms with high profits face of every three dollars spent on health- LEHID for “Large Employer Health higher premium increases because they care, and even this figure understates the Insurance Data” — to study the private increase benefits on some dimensions importance of the sector: many public insurance industry, focusing on local mar- Additional analyses reveal that firms with insurance programs now rely on private ket structure, the economic conduct of positive changes in operating profits are insurers to manage a substantial share of insurance companies, and implications much less likely to make changes to their spending (for example, Medicaid man- for health insurance premiums. I also use roster of health plans; this unwillingness aged care, Medicare Advantage), and the insurance industry as a lens through to make changes in insurance offerings private insurers heavily influence out- which to examine the impact of potential in good times facilitates higher pricing of-pocket spending by their enrollees.1 policy reforms, such as tort reform and an by incumbent carriers. Over the study Looking ahead, the Affordable Care Act expanded insurance exchange in which period (1998 to 2005), the share of the will subsidize the purchase of private employees shop for a health plan using sample residing in markets with six or health insurance through state or local their employer subsidies. fewer carriers increased from 7 to 23 per- health exchanges beginning in 2014. The cent, suggesting that more Americans are industry is expected to gain 16 million The Economic Conduct now residing in markets where insurers customers as a result.2 Notwithstanding of Health Insurers possess and exercise market power. this prominent role, the private health Another study, undertaken with insurance sector has garnered relatively Among the most striking facts I Mark Duggan and Subramaniam little attention from academic research- uncovered in my initial analysis of LEHID Ramanarayanan, estimates the impact of ers, primarily because high-quality data is that local health insurance markets are changes in local market concentration on on insurance contracts is so limited. very concentrated. Moreover, many mar- premium growth.4 We begin by examin- To explore various issues associated kets have become more concentrated over ing whether premiums tend to rise more with health insurance markets, I devel- time. I pursued two different strategies quickly in consolidating markets. We find oped a relationship with a major benefits to examine whether there is a causal link that they do not, which may help to consulting firm that gathers an extensive between insurance market structure and explain why consolidations have rarely dataset on the health plans offered by soaring health insurance premiums. encountered resistance from antitrust its clients. The firm generously agreed to In a 2008 paper, I explore whether authorities and insurance commissioners. share the data for my research, subject to and where insurance carriers engage in However, such an analysis fails to con- strict confidentiality criteria. At present direct price discrimination, charging trol for the fact that consolidations do the data span the period from 1998–2009, higher premiums to firms (that is, their not occur randomly across markets. To and contain information on roughly 900 clients) with deeper pockets, as measured address this concern, we hone in on the distinct firms covering around 10 million by operating profits.3 In a competitive effects of one particular mega-merger: participants per year. Although the sam- industry, price (for a fixed product) would the 1999 acquisition of Prudential ple is not random, I have found that it is not vary based on customers’ ability to Healthcare by Aetna. Both were national representative of large firms nationwide, pay. I find that firms with increases in firms, active in most local insurance mar- and hence of the large group insurance operating profits subsequently face larger kets, and thus the merger had widespread premium increases. This relationship is impact. However, the pre-merger mar- strongest in geographic markets served by ket shares of the two firms varied sig- *Dafny is a Research Associate in the a small number of insurance carriers (par- nificantly across local markets, result- NBER’s Programs on Aging and Healthcare ticularly six or less). Therefore, a multisite ing in very different — and we argue, and Associate Professor of Management firm with high profits in a given year (say, fairly random — “shocks” to post-merger and Strategy at the Kellogg School of Management at Northwestern University. a large firm such as The Gap) will face competition. We quantify the impact Her Profile appears later in this issue. higher premiums for its health plans, but of these shocks on premiums, and apply
NBER Reporter • 2012 Number 1 7 the resulting estimate to the total aver- through employer-sponsored plans. Would Tort Reform Lower age change in market concentration over Although there are no legal impedi- Insurance Premiums? the period 1998–2006. We estimate that ments to offering a broad array of plans, consolidation during this period raised in practice employers offer a very lim- Tort reform, which encompasses premiums by around 7 percent. Although ited set of choices: a 2011 survey by a variety of legal reforms designed to this is a small figure relative to the aggre- the Kaiser Family Foundation/Health limit the tort exposure of healthcare gate real premium increase during the Retirement Education Trust finds 47 providers, has been implemented in same period (around 50 percent), it is percent of employees are offered only some form in every state. There is sub- large relative to typical operating margins one plan type (for example, HMO or stantial support for a uniform and strin- of insurers, which were around 5 percent PPO). Increased choice is frequently gent federal tort reform, but there are of premiums during our study period.5 cited as an objective of healthcare conflicting opinions on the impact such We also find evidence that insurer con- reform, but its benefits have never been an initiative would have on healthcare solidation depresses healthcare employ- quantified. One of my papers, coau- costs. The direct costs associated with ment, and facilitates the substitution of thored with Kate Ho and Mauricio malpractice are fairly low (no more nurses for physicians. Varela, evaluates how much employees than 2 percent of healthcare spend- In another project on insurer con- would be willing to pay for the right to ing), but the indirect costs associated duct, Ramanarayanan and I focus on apply their employer subsidy to the plan with greater precautionary spending or whether an insurer’s ownership status of their choosing.7 “defensive medicine” practiced in an affects its behavior.6 For-profits account We estimate the value of choice in attempt to avert malpractice litigation for more than half of private health insur- three steps. First, we estimate a model of are believed to be far more substan- ance in the United States. We assess the employee preferences using employees’ tial. Most prior studies have focused impact of local-area for-profit market choices from the set of plans they are on particular litigation-prone condi- share on premiums, medical-loss ratios offered. Second, we use the estimated tions, such as pregnancy10 or heart dis- (the share of premiums paid out in medi- parameters from this model to predict ease11, with the exception of Baicker, cal claims), and insurance coverage rates. employees’ choices in a hypothetical Fisher, and Chandra (2007) who study Our analysis is longitudinal, focusing on world in which all plans in a market are the effect of malpractice premiums on changes in these outcomes and how they available to them on the same terms, Medicare spending.12 By pairing the relate to plausibly exogenous changes in that is, with equivalent subsidies and at LEHID insurance data with a data- local for-profit market share induced by large-group prices.8 Third, we calculate base containing the details and tim- the conversions of Blue Cross Blue Shield the welfare gain (in dollars) for each ing of state reforms over 1998–2006, (BCBS) affiliates to for-profit status in group of employees, that is, the dollar Avraham, Schanzenbach, and I were the years following 1994. A 1994 change amount that employees would be will- able to estimate the impact of common in the BCBS Association bylaws per- ing to pay for the right to select their tort reforms on a spending measure mitted such conversions, and for-profit preferred plan from among all those that incorporates the entire spectrum of BCBS affiliates now operate in 14 states. available in their local market. We con- healthcare.13 We studied responses sep- We find no significant effects servatively estimate this to be 13 per- arately by insurance type — self-insured of for-profit market share on any of cent of premiums, on average. A proper (in which the employer bears the risk of these outcomes, on average. However, accounting of the costs and benefits of realized medical spending by enrollees) in geographic areas where the convert- employer-sponsored insurance versus an and fully-insured (in which the insur- ing BCBS affiliate had substantial mar- individually-purchased insurance policy ance carrier bears this risk). ket share, premiums for employer plans would include this nontrivial gain. We find that three of the most increased, employer-sponsored coverage In a companion analysis, we show common reforms (caps on non-eco- rates decreased, and Medicaid enroll- that welfare gains are negatively cor- nomic damages, collateral source ment increased. Our results suggest that related with firm size and family size, reform, and joint-and-several liability subsidies for new not-for-profit insurers, and positively correlated with current reform) reduce self-insured premiums such as those in the Affordable Care Act, premium levels.9 Relative to the plans by 1 to 2 percent each. The effect of are only likely to create value if the insur- offered by employers, most employ- each reform is somewhat attenuated ers can achieve substantial market share. ees would prefer options that are sim- if all three reforms are adopted simul- ilarly-priced, but with slightly differ- taneously. These estimates far exceed Do Employers Offer the Plans ent features, chiefly “Point of Service” savings from reducing direct liabil- that Employees Want? plans — an HMO-PPO hybrid which ity costs, and hence they suggest that provides coverage for services deliv- tort reform does alter provider behav- Nearly 60 percent of nonelderly ered by out-of-network providers, but ior. However, the fact that our find- Americans purchase health insurance at higher rates of cost-sharing. ings are not present for fully-insured
8 NBER Reporter • 2012 Number1 plans — which in our sample are pri- reforms will have the greatest initial use a rich regression model that incorpo- marily HMOs — suggests that managed impact on these markets. rates, among other things, the risk profile care is similarly effective in discourag- of each set of employees as reflected in ing defensive medicine, echoing a con- pricing of their current plans. clusion from prior research focused on 1 Source: National Health 9 L. Dafny, K. Ho, and Mauricio heart disease.14 We conclude that fed- Expenditure Accounts (2010), pub- Varela, “An Individual Healthplan eral tort reform is unlikely to have a lished by the Department of Health Exchange: Which Employees Would large impact on spending because less and Human Services and available Benefit and Why?,” American than half of the privately-insured popu- for download at https://www.cms.gov/ Economic Review, Papers and lation is enrolled in self-insured plans, NationalHealthExpendData/02_ Proceedings, May 2010, 100, pp. 485– and several states have already imple- NationalHealthAccountsHistorical. 89. mented the three reforms associated asp#TopOfPage. 10 J. Currie and W. Bentley MacLeod, with significant spending reductions. 2 Source: “CBO’s Analysis of the Major “First Do No Harm? Tort Reform Health Care Legislation Enacted in and Birth Outcomes,” NBER Working Summary March 2010,” March 30, 2011, avail- Paper No. 12478, August 2006, and able online at
NBER Reporter • 2012 Number 1 9 The Transfer of Knowledge across Countries
Wolfgang Keller*
How does knowledge flow between ties. Take the corporate downsizer played from low-innovation (Wyoming) states. firms in different countries? Without any by George Clooney in the 2009 movie We ask whether business travel from doubt there are firms with vastly differ- “Up in the Air”; his job is it to fire peo- the United States has an impact on inno- ent capabilities, or knowledge, operating ple in person. Or, take the common belief vation rates across countries, which are in the world today. These firm-level dif- among corporate executives that in-per- measured by patenting rates computed ferences lead to aggregate effects in terms son contacts are far more effective than from the NBER patent database. In order of production, trade, and income across anything else for closing business deals.2 not to simply pick up positive shocks that countries. Knowledge does not seem to These in-person contacts are cost-effective increase innovation and business travel have an automatic tendency to flow from because they have an element of non-cod- from the United States, we include, essen- one country to another, quickly leading ifiability (that is, they cannot be subject to tially, the ratio of business to family trips to equalization across locations. Can firms programmed rules), be it to show appre- in the regression. Because family trips actually facilitate, or prevent, international ciation for past work, or to establish trust, are not affected by changes in a country’s knowledge transfers? While some knowl- that cannot simply be had from a letter or business climate, this helps to filter out edge transfers are between business part- phone call. spurious effects. ners, others are not, and such unintended Non-codifiabilities may play a par- Our finding is that inward business knowledge transfers to other firms are ticularly important role in the transfer of travel raises a country’s rate of patent- externalities (called spillovers). One well- new knowledge, the kind of knowledge ing. The increase is modest, but statisti- known fact is that knowledge is geographi- that is needed to engage in innovation, cally significant. In two ways, these results cally localized.1 Localization, it turns out, and in that case, it may be best to demon- point to the importance of the knowl- is a natural outcome when knowledge is strate and explain the knowledge face-to- edge carried by each individual traveler. difficult to describe in a self-contained way. face.3 In work with Nune Hovhannisyan, First, the impact on patenting is higher if In this setting, knowledge transfers require I evaluate the idea that international busi- the traveler came from a high-innovation the movement of people, and localization ness travel may affect the rate of innova- rather than a low-innovation U.S. state. arises simply because there are costs of tion across countries.4 Second, U.S. business travel has a stron- moving people in geographic space. Empirical research on international ger impact on innovation for patents that More generally, in recent research with service trade is still relatively rare, not only have U.S. co-inventors, consistent with several coauthors I examine the idea that because services are often highly differen- the idea that the traveler was associated knowledge transfers can be linked to the tiated (so difficult to aggregate) but also with this patent application. In that case, economic engagement of firms and peo- because there is not yet much comparable of course, the knowledge transfer would ple across countries. I analyze the relation- information across countries. Specifically, cease to be a pure spillover. ship between knowledge flows and inter- in the case of air travel there is typi- national business travel, the role of both cally no information on whether the pur- Knowledge Spillovers through multinational firms and trade, and a theo- pose of travel is business or non-business; Multinational Activity retical framework that focuses on the dif- much of the information, in fact, is col- ferent ways in which knowledge flows. lected by national tourism agencies. Data Governments all over the world Innovation and International employed in our study is both unusually spend large amounts of resources in order rich and consistent. We have information to attract multinational firms to their Business Travel on more than 100,000 trips between the country, based on the assumption that When does the need for in-person years 1993 and 2003, including whether such firms generate positive externalities, contacts arise? There are several possibili- the purpose of travel was business or not. or foreign direct investment (FDI) spill- All trips are from the United States to 36 overs, to domestic firms.5 At the same other countries, both rich and poor. We time, the evidence on substantial FDI *Keller is a Research Associate in the 6 NBER’s Programs on Productivity and do not know the identity of the traveler, spillovers is thin. In earlier work with International Trade and Investment and or his knowledge level, but there is infor- Stephen R. Yeaple, I consider spillovers a professor of economics at the University mation on the state in the United States to U.S. firms from U.S.-based affiliates of Colorado. His Profile appears later in where the trip originated so that we can owned by foreign multinationals.7 this issue. distinguish high-innovation (California) Our choice of a country as highly
10 NBER Reporter • 2012 Number1 developed as the United States might between firms when this generates econo- tries and on the trade costs for iPads — seem strange, but foreign-owned affili- mies of scale. that is, their weight. How about the trans- ates located in the United States are In a project with Ram C. Acharya, I fer of knowledge — does it defy gravity as considerably more productive than the trace out international knowledge flows one might expect from knowledge as an average U.S. firm, so that the scope for by relating foreign R and D to domes- intangible? I cast the question in terms knowledge transfers from foreign firms tic productivity via bilateral imports in a of the operations of multinational firms. is definitely there.8 Moreover, employ- large sample of manufacturing industries Not only do they account for much of the ment in foreign-owned affiliates in the for three decades (1973 to 2002).10 A world’s R and D but they also have every United States has increased by 50 per- good reason for studying relationships at incentive to supply offshore affiliates with cent between 1987 and 1996 (from the industry level is that R and D provides their knowledge as efficiently as possible. about 8 percent to 12 percent). We ana- an explicit measure of knowledge; at the Based on the global operations of lyze knowledge transfers in terms of micro level across many countries, there is U.S. multinationals included in data at changes in firms’ productivity and ask no consistent data on a broad knowledge the Bureau of Economic Analysis (BEA), whether U.S.-owned firms in industries measure such as R and D. it turns out that individual multinational where foreign-owned firms are relatively One question is whether productiv- affiliates sell less the further away they prevalent have become more productive. ity is affected only by domestic R and D are from their home country—just like In a sample of about 1,300 U.S. man- or also by foreign R and D and imports. gravity in trade. Moreover, the gravity ufacturing firms, the estimated FDI spill- We find that the R and D of six major effect is strongest for the most R and D-, overs account for about 14 percent of countries close to the world’s technology or knowledge-intensive, goods. Why is U.S. manufacturing productivity growth frontier typically increases their produc- gravity so strong for goods that have low between the years 1987 and 1996. We tivity by about three times as much as weight-to-value ratios? find that FDI spillovers materialize rel- does domestic R and D. This finding sug- My explanation focuses on the dif- atively quickly, within two years, and gests that for most countries in the world, ficulties of communicating knowledge they benefit disproportionately relatively foreign sources of knowledge are more from one person to another (disembod- small U.S. firms. important than domestic sources, under- ied transfer) versus the costs of mov- These FDI spillovers are large enough lining the importance of spillovers. We ing knowledge in goods (embodied to make it worthwhile asking whether also show that foreign R and D spillovers transfer). Because of its non-codifiabil- there may be a role for FDI subsidies. from Germany, France, and the United ity, communicating knowledge between Why are the estimates larger than those Kingdom are more strongly related to the multinational parent manager and in earlier studies? First, we show that FDI imports from these countries, while spill- the offshore plant manager is prone to spillovers do not exist sector-wide but are overs from the United States are less tied costly errors.12 The relatively high costs largely concentrated in high-tech, R and to imports from the United States. The of knowledge-intensive production lead D-intensive sectors. Second, the U.S. FDI magnitude of knowledge transfers also to both lower affiliate sales and the mul- data tracks foreign affiliate activity - bet varies strongly across bilateral country- tinational firm’s shifting its mix from off- ter than in other countries.9 Knowing pairs. For example, Ireland benefits much shore production (FDI) to onshore pro- more precisely in which sectors foreign more, by a factor of seven, from knowl- duction, followed by exports. firms operate improves the signal-to-noise edge created in the United States than Empirical analysis using the BEA ratio in the empirical analysis and leads to does South Korea. micro data shows that this mechanism higher FDI spillover estimates. The results point to a heterogeneous generates the gravity patterns in the data, web of global knowledge transfer where even in light of competing explanations. Technology Transfer knowledge flows are at times embodied in Moreover, the extent to which multina- through Imports goods and at other times not. To go fur- tionals use trade that embodies knowl- ther, I develop and test a model of trade edge rises in knowledge intensity, and In the typical model of interna- and FDI, together with Yeaple, that puts switching to offshore production to avoid tional trade, there are no knowledge flows at the center the choice between embod- trade costs is harder for knowledge-inten- between firms. One way of looking at it is ied and disembodied knowledge transfer. sive goods, as the relatively high com- that such knowledge flows are unneces- munication costs would imply. Also, the sary because by importing from abroad, Knowledge and Gravity 11 effects are quantitatively important. In the domestic consumers have in fact gained pharmaceutical industry, for example, our access to foreign production knowledge. Economists like to describe the trade estimates suggest that the costs of com- Estimates of the gains from trade are typi- between two countries by an equation municating knowledge abroad raise the cally quite small, however, and research analogous to the gravity equation in phys- costs of offshore production by roughly has moved to explore the role of trade ics. Trade in iPads, for example, depends 9 percent relative to domestic produc- in transferring production knowledge on the masses (or incomes) of both coun- tion. This suggests that unless the sav-
NBER Reporter • 2012 Number 1 11 ings in shipping and production costs in W. Keller, “Geographic Localization Economics and Statistics, November from producing abroad exceed this level, of International Technology Diffusion,” 2009, 91(4), pp. 821–31. the firm will choose to produce domesti- NBER Working Paper No. 7509, January 8 See N. G. Howenstine and W. J. Zeile, cally. Most previous analyses of FDI, how- 2000, and American Economic Review “Characteristics of Foreign-Owned U.S. ever, have focused only on the latter costs, 92, 1(2002): pp. 120–42. Manufacturing Establishments,” Survey thereby overstating the incentives for off- 2 See the surveys of business executives of Current Business, January 1994, pp. shore production in knowledge-intensive cited in N. Hovhannisyan and W. Keller, 34–9. industries. Frictions in knowledge trans- “International Business Travel: An Engine 9 In most countries, foreign firms are fers make multinational firms far less foot- of Innovation?,” NBER Working Paper No. only classified by their main industry loose than is generally presumed 17100, May 2011. (largest fraction of sales). In contrast, 3 See W. Keller, “International Trade, U.S. FDI data identifies the eight largest Summary and Outlook Foreign Direct Investment, and Technology industries in which each foreign affiliate Spillovers,” op. cit., pages 6–7. The idea that is active separately. Because knowledge is non-rival it is knowledge can be in part non-codifiable has 10 R. C. Acharya and W. Keller, often presumed to be universally avail- been most fully explored in Polanyi (1958). “Technology Transfer Through Imports,” able. My research indicates that while this 4 N. Hovhannisyan and W. Keller, NBER Working Paper No. 13086, is not the case much can be learned about “International Business Travel: An Engine May 2007, and Canadian Journal of the location and scale of economic activ- of Innovation?,” op. cit. Economics Vol.42, No.4 (2009), pp. ity from examining the ways in which 5 A frequently mentioned mechanism 1411–48; this approach extends work by knowledge is transferred across countries. is labor turnover, where employees of the Zvi Griliches, “Issues in assessing the contri- Within countries, knowledge transfer multinational quit and then join a domes- bution of R and D to productivity growth,” costs might be just as important as across tic firm without having fully paid for the The Bell Journal of Economics, 10,1 countries, and might help to explain knowledge acquired in the multinational (1979), pp. 92–116. the structure and activity of multi-plant through lower wages. 11 See W.Keller and S. R. Yeaple, “The firms.13 Future work on which knowledge 6 H. Görg and D. Greenaway, “Much Gravity of Knowledge,” NBER Working transfers occur in-house versus at arm’s Ado about Nothing? Do Domestic Firms Paper No. 15509, November 2009, revision length seems to be also a promising area Really Benefit from Foreign Direct issued in April 2011. of research. Investment?,” World Bank Research 12 Arrow argues that knowledge transfer Observer 19, 2 (2004), pp. 171–97; W. costs are mainly communication costs Keller, “International Trade, Foreign between teacher and student; see K. J. 1 W. Keller, “International Trade, Direct Investment, and Technology Arrow, “Classificatory Notes on the Foreign Direct Investment, and Spillovers,” op. cit. Production and Transmission of Techno Technology Spillovers,” NBER Working 7 W. Keller and S. R. Yeaple, logical Knowledge,” American Economic Paper No. 15442, October 2009, and “Multinational Enterprises, International Review 59, 2 (1969), pp. 29–35. Handbook of the Economics of Trade, and Productivity Growth: 13 See evidence in A. Hortacsu and C. Innovation, Chapter 19, B. H. Hall Firm-Level Evidence from the United Syverson, “Why Do Firms Own Production and N. Rosenberg eds., North-Holland: States,” NBER Working Paper No. Chains?,” mimeo, University of Chicago, Elsevier, 2010. The original finding is 9504, February 2003, and Review of January 2012.
12 NBER Reporter • 2012 Number1 Inflation Forecasting
James H. Stock and Mark W. Watson*
Forecasting inflation is one of the core responsibilities of economists at cen- tral banks and in the private sector, and models of inflation dynamics play a cen- tral role in determining monetary policy. In this light, it is not surprising that there is a long and rich literature on inflation dynamics and inflation forecasting. A recurring theme in this literature is the usefulness — or not — of the Phillips curve as a tool for forecasting infla- tion. Phillips1 originally documented an inverse relation between the rates of wage inflation and unemployment in the United Kingdom. Samuelson and Solow 2 extended “Phillips’ curve” to U.S. data and to price inflation. The Phillips curve remains at the core of modern specifica- tions, which additionally include expec- tations of inflation, often use activity variables other than the unemployment rate, and incorporate sluggish inflation Figure 1 — The rate of unemployment (upper lines) and the four-quarter rate of core PCE inflation dynamics. Indeed, the central price deter- (lower lines) over six U.S. slumps since 1960, with means (dashed lines) and ± one standard devia- mination equation in modern dynamic tion bands (dotted lines). The rates are expressed as deviations from their values at the NBER-dated stochastic general equilibrium models, peak. The horizontal axis is scaled so that the NBER-dated peak occurs at date 0 and the unemploy- the New Keynesian Phillips Curve, is a ment rate peaks at date 1. In the postwar U.S., recessions and their aftermath experience disinflation. direct descendant of the original Phillips curve, augmented to incorporate for- models. Most of this work revolves deviated from their values at the respec- ward-looking inflation expectations and around the use of real economic activ- tive NBER-dated peak; the vertical axis is with a real activity measure serving as a ity to forecast inflation, to which we scaled so that all recessions have the same proxy for real marginal cost. refer broadly as Phillips curve models, increase in the unemployment rate; and This research summary reviews our although other forecasting frameworks the horizontal axis is scaled so that the work of the past fifteen years on infla- (such as incorporating monetary aggre- total time span is twice the time between tion forecasting using small, stand-alone gates) are also considered. the start of the recession and the peak of Our research on inflation forecast- the unemployment rate. The mean paths *Stock and Watson are Research Associates ing and inflation dynamics leads us to of the unemployment rates and inflation in the NBER’s Program on Economic two broad conclusions. First, there are are shown as dashed lines, and the dotted Fluctuations and Growth and members important regularities in the inflation-out- lines are ± one standard deviation bands3. of the NBER’s Business Cycle Dating put relation. In particular, in the post- Over these six recessions and recoveries, Committee. Stock is also the Harold war United States, recessions are times of by the time the unemployment rate peaks, Hitchings Burbank Professor of Political disinflation. This regularity was behind inflation has fallen on average by 0.37 per- Economy in Harvard University’s the deflation scares of 2002–3 and 2009– centage points for each percentage point Economics Department. Watson is the 10. Figure 1 plots the rate of unemploy- increase in the rate of unemployment. Howard Harrison and Gabrielle Snyder ment and the four-quarter rate of core Second, we conclude that despite Beck Professor of Economics and Public PCE inflation for six U.S. slumps from this evident regularity, inflation dynam- Affairs at Princeton University. Their 1960 to the present, labeled by the NBER- ics and inflation forecasting models Profiles appear later in this issue. dated cyclical peak. The plotted rates are exhibit considerable instability. Such
NBER Reporter • 2012 Number 1 13 instability is unsurprising, given the The Time-Varying NAIRU economic data) to construct an activ- substantial changes in monetary policy, ity index for forecasting inflation14. unionization, globalization, and other In earlier work, we focused on time The Chicago Fed currently produces aspects of the U.S. economy that are rel- variation that entered through move- and publishes this monthly index of 85 evant to price-setting. Indeed, Figure ments in the NAIRU (the non-acceler- activity variables as the Chicago Fed 1 suggests one important aspect of this ating inflation rate of unemployment).9 National Activity Index (CFNAI)15. instability: the rate of inflation fell by The NAIRU is the rate of unemploy- less following the NBER-dated peaks of ment at which there is no tendency Time-varying Expectations 2001Q1 and 2007Q2 than it did on aver- for the inflation rate to increase or to Anchoring age during earlier the previous five reces- decrease, and the unemployment gap sions. A leading explanation for the more is the deviation of the unemployment In addition to time variation aris- muted response of inflation over the two rate from the NAIRU. The NAIRU ing from an evolving NAIRU, the per- recent recessions is that monetary policy plausibly changes over time because sistence of U.S. inflation varies over has succeeded in anchoring inflation- of changes in demographics, in meth- time. This is consistent with the notion ary expectations. However, because both ods of job search, and in other features suggested by Figure 1 that inflation disinflationary episodes started at low of the U.S. economy. A time-varying expectations have been better anchored levels, another candidate explanation is NAIRU can be estimated by introduc- over the past decade than earlier. We resistance to nominal wage declines. ing time variation into the intercept of found that this changing persistence a Phillips curve. In a series of papers, can be captured in a simple parsimoni- Time Variation in Inflation we developed methods for estimating a ous univariate time-series model that Forecasting Models time-varying NAIRU10,11 and its stan- performs well across different inflation dard error, and these methods were regimes16. According to the model, The first step towards handling used and further developed by Robert unexpected changes in the rate of infla- instability is admitting that you have J. Gordon12 and others. One flexible tion during the 1970s and early 1980s a problem. Providing formal statisti- method is to model the NAIRU as an were quickly incorporated into infla- cal evidence of instability entails the unobserved, or latent, process that fol- tionary expectations. In contrast, dur- use of a variety of methods, includ- lows a random walk. In related method- ing the past 15 years inflation expec- ing tests for in-sample breaks, tests for ological work, we developed methods tations, and thus inflation itself, have breaks at the end of the sample, and for estimating the variance parameter responded far more sluggishly to an pseudo out-of-sample forecast compar- governing the magnitude of the innova- inflation surprise. isons. We have undertaken such analy- tions for this random walk13. When this univariate model of ses in a number of studies over the past Empirically, we found that there time-varying expectations anchoring is fifteen years; while forecasting mod- has been considerable variation in the merged with measures of economic els for other macroeconomic variables NAIRU in the United States over the activity, the result is a Phillips curve also exhibit structural instability4, rela- past fifty years. Confidence intervals in which the dynamic effect on infla- tions involving inflation are particularly for the NAIRU are quite wide, typi- tion of an exogenous change in activ- problematic. This instability extends cally exceeding plus or minus one per- ity depends on the degree of expec- beyond Phillips Curve models, indeed centage point of unemployment. These tations anchoring. Figure 2 (which models using asset prices5 or monetary intervals are widest towards the end of extends Figure 14 in Stock and Watson, aggregates6 appear even more unstable the sample because we do not have the 2010) shows a dynamic simulation of than ones based on aggregate activity. data on future inflation needed to pin a Phillips curve model (dashed line) In a 2008 paper, we showed that down today’s NAIRU. using a “recession unemployment gap” there are some meaningful patterns The unemployment rate is only and a single standard error confidence in the instability of the output-infla- one measure of economic activity. band (dotted lines). The model param- tion relation7. In particular, the per- This observation raises the question of eters used to compute the predicted formance of Phillips curve forecasts which of the many candidate measures path and standard error bands date is episodic: as Atkeson and Ohanian of economic activity one should use for from August 2010, while the actual forcefully demonstrated8, it was quite inflation forecasting. One approach is data are through 2011Q4 for unem- difficult to best naïve univariate fore- to use very many such predictors, but ployment and 2011Q3 for core PCE casting models during much of the with statistical discipline that avoids inflation, so the final five quarters of Great Moderation period. But, as sug- over-fitting. To this end, we developed the plot in Figure 2 provide a true out- gested by Figure 1, Phillips curve fore- a dynamic factor model (a method of-sample test of the model. In the casts add value during recessions and for handling high-dimensional datas- published model, strong expectations their aftermath. ets particularly well suited to macro- anchoring leads to muted disinflation
14 NBER Reporter • 2012 Number1 during slumps. As can be seen in Figure 2, this model captures the modest dis- inflation we experienced subsequent to the 2007Q4 recession. Ongoing Research Questions
Many important questions remain. One is how to develop a single Phillips curve forecasting model with explicit time variation, with the goal of outper- forming univariate models during reces- sionary episodes and performing at least as well otherwise. In current work, Stella and Stock make some positive steps towards this goal17. An important remaining question is whether we can ascertain why the dis- inflations following the 2001Q1 and 2007Q4 recessions were so muted. The easy answer is anchored expectations Figure 2 — The rate of unemployment (upper line) and four-quarter rate of core PCE inflation (lower and greater confidence in the conduct of line) for 16 quarters following the 2007Q4 NBER-dated peak, deviated from their 2007Q4 value. The monetary policy. It is, however, incum- solid and dashed lines are the mean from a dynamic simulation of the model in Stock and Watson bent on researchers to question the easy (2010) and a ± one standard error band. answers and to rule out other proximate, coincidental causes, such as exchange 2 in J.H. Stock and M.W. Watson, Working Paper No. 14322, September rate movements (as occurred in 2003–4) “Modeling Inflation after the Crisis,” 2008, and Ch. 3 in Understanding and energy price increases (as occurred NBER Working Paper No. 16488, Inflation and the Implications for in 2010–11). Our work on these and October 2010, and in “Macroeconomic Monetary Policy, J. Fuhrer, Y. Kodrzycki, related issues of inflation forecasting and Policy: Post-Crisis and Risks Ahead,” J. Little, and G. Olivei, eds., Cambridge: inflation dynamics is onoing. Proceedings of the Federal Reserve Bank MIT Press, 2009. of Kansas City, 2010 Jackson Hole 8 A. Atkeson and L.E. Ohanian, “Are Symposium. Phillips Curves Useful for Forecasting 1 A.W. Phillips, “The Relation 4 J.H. Stock and M.W. Watson, Inflation?” Federal Reserve Bank of Between Unemployment and the Rate “Evidence on Structural Instability in Minneapolis Quarterly Review 25(1) of Change of Money Wage Rates in Macroeconomic Time Series Relations,” (2001), pp. 2–11. the United Kingdom, 1861–1957,” NBER Technical Working Paper 9 D. Staiger, J.H. Stock, and M.W. Economica, 25, 1958, pp. 283–99. T0164, September 1994, and Journal Watson, “How Precise Are Estimates of 2 P.A. Samuelson and R.M. Solow, of Business and Economic Statistics, the Natural Rate of Unemployment?” “Analytical Aspects of Anti-Inflation 14 (1996), pp. 11–30. NBER Working Paper No. 5477, Policy,” American Economic Review, 5 J.H. Stock and M.W. Watson, March 1996, and in C. Romer and Papers and Proceedings, 50, 1960, “Forecasting Output and Inflation: The D. Romer, eds., Reducing Inflation: pp. 177–94. The history of the Phillips Role of Asset Prices,” NBER Working Motivation and Strategy, University curve is reviewed in R.J. Gordon, “The Paper No. 8180, March 2001, and of Chicago Press for the NBER, 1997, History of the Phillips Curve: Consensus Journal of Economic Literature 41 pp.195–242. and Bifurcation,” Economica 78, 2011, (2003), pp. 788–829. 10 D. Staiger, J.H. Stock, and M.W. pp. 10–50. 6 R. King, J.H. Stock, and M.W. Watson, “The NAIRU, Unemployment, 3 Figure 1 merges the recessions begin- Watson, “Temporal Instability of the and Monetary Policy,” Journal of ning in 1980Q 1 and 1981Q 3 because Unemployment-Inflation Relation,” Economic Perspectives, 11 (Winter of the brevity of the 1980Q 1 reces- Economic Perspectives, Federal 1997), pp. 33–51. sion, and omits the 1973Q 4 reces- Reserve Bank of Chicago (May/June 11 D. Staiger, J.H. Stock, and M.W. sion, which saw an initial increase in 1995), pp. 2–12. Watson, “Prices, Wages and the U.S. inflation because of the oil price shock. 7 J.H. Stock and M.W. Watson, “Phillips NAIRU in the 1990s,” NBER Working Figure 1 is an updated version of Figure Curve Inflation Forecasts,” NBER Paper No. 8320, June 2001, and Ch. 1
NBER Reporter • 2012 Number 1 15 in The Roaring Nineties, A. Krueger Coefficient Variance in a Time Varying publications/cfnai/index.cfm. and R. Solow, eds., Russell Sage Parameter Model,” NBER Technical 16 J.H. Stock and M.W. Watson, Foundation/The Century Fund: New Working Paper No. 201, August 1996, “Why Has Inflation Become Harder York (2001), pp. 3–60. and Journal of the American Statistical to Forecast,” NBER Working Paper 12 R.J. Gordon, “Foundations of the Association, 93 (1998), pp. 349–58. No. 12324, June 2006, and Journal Goldilocks Economy: Supply Shocks and 14 J.H. Stock and M.W. Watson, of Money, Credit, and Banking, 39 the Time-Varying NAIRU,” Brookings “Forecasting Inflation,” NBER Working (2007), pp. 3–34. Papers on Economic Activity 1998:2, Paper No. 7023, March 1999, and 17 A. Stella and J.H. Stock, “State- pp. 297–333. Journal of Monetary Economics 44, Dependent Models for Inflation 13 J.H. Stock and M.W. Watson, no. 2, (1999), pp. 293–335. Forecasting,” manuscript, Harvard “Median Unbiased Estimation of 15 http://www.chicagofed.org/webpages/ University, (2011).
Wealth After Retirement
Steven Venti*
Over the past two decades, the Wealth at Retirement efits accounts for about one-third of aging of the “Baby Boomers” has focused all household wealth and housing and attention on how members of this gen- Retired households depend primar- other real estate account for another eration accumulated assets during their ily on three sources of financial support one-quarter of wealth. The capitalized working years. Now that the leading in retirement: benefits from the Social value of DB pension benefits, assets edge of this group has passed into retire- Security system; payments from pri- held in PRAs, and financial assets held ment, the focus of researchers — as well vate defined benefit (DB) pension plans; outside PRAs each account for an addi- as policymakers and the financial ser- and withdrawals from household sav- tional 10 to 15 percent of total wealth. vices industry — is shifting to the draw- ings, including withdrawals from per- These averages hide substantial dif- down of financial resources in later life. sonal retirement accounts (PRAs) such ferences in both the level of total wealth My recent research, much of which is as IRAs, Keoghs, 401(k)s and simi- and its composition. At the 90th percen- co-authored with James M. Poterba and lar defined contribution plans. Benefits tile of the wealth distribution, financial David A. Wise, focuses on the factors from Social Security and DB pensions assets (including PRAs) and DB pen- that shape the age profile of wealth after are in the form of annuities that pro- sion wealth account for over half of all retirement. The goal of this work is to vide a stream of payouts until death. balance sheet wealth and Social Security better understand what households do Assets held in PRAs or financial assets is relatively unimportant. At the other with their assets after retirement and, held outside of retirement accounts are extreme, in the lower part of the wealth in particular, to understand how asset typically not annuitized and are instead distribution, many households have few draw-down decisions are affected by spent or saved at the owners’ discretion. assets outside of Social Security and health, education, and the structure of In a recent paper, we describe the bal- housing. Half of all households headed public and private annuities. ance sheets for households headed by by someone between 65 and 69 had someone between the ages of 65 and total financial assets, including 401(k)s 69 in the 2008 wave of the Health and and IRAs, of less than $52,000 in 2008. Retirement Study (HRS).1 To facili- Thus, a large fraction of households have *Venti is a Research Associate in the NBER’s tate comparison of the various portfo- few assets, with the possible exception of Program on the Economics of Aging and lio components, we capitalize Social housing equity, to supplement annuity the DeWalt Ankeny Professor of Economic Security and DB pension payouts. income — primarily Social Security — in Policy at Dartmouth College. His Profile Averaged over all households, the cap- retirement. For example, only 47 percent appears later in this issue. italized value of Social Security ben- of these households have sufficient finan-
16 NBER Reporter • 2012 Number1 cial assets to purchase a private annuity a typical year is less than the rate of return cost of poor health by estimating the that would increase their life-contingent earned on PRA assets, generating an age cumulative effect on assets of all of the income by more than $5,000 per year.2 profile of increasing personal retirement adverse consequences of poor health Thus it is perhaps not a surprise that we account balances for many households over a long period of time.7 Using data observe that in later years 19 percent of over the 1990s and the first half of the from the HRS, we compare the asset all persons die with zero financial assets last decade. growth between 1992 and 2008 of per- and 46 percent of all persons have less In a subsequent paper, we broad- sons with similar assets in 1992, but dif- than $10,000 of financial assets at death.3 ened our analysis to consider the evolu- ferent levels of health. The analysis uses tion of total non-annuitized assets after an index of health constructed from a The Trajectory of Assets retirement.6 We found that the evolu- large number of self-reported health after Retirement tion of assets is strongly related to family questions concerning functional limi- status transitions. For both single indi- tations and the presence of health con- What happens to non-annuitized viduals and married couples who do not ditions. The results indicate that the assets after retirement? The standard experience death, separation or widow- asset cost of poor health may be quite life-cycle model suggests that house- hood, average total assets increase well large, substantially larger than most holds will gradually draw down non- into old age. In contrast, married individ- survey-based estimates of out-of-pocket annuitized assets to finance consump- uals that experience a family status tran- expenditures. For example, within each tion in retirement. In an earlier paper, sition exhibit much slower asset growth asset quintile, the healthiest individu- Wise and I looked at the trajectory of prior to the transition and often experi- als (those in the top third of the health home equity — the primary non-annu- ence a large decline in asset values at the distribution) accumulate at least 50 per- ity asset for most households — in retire- time of the transition. cent more assets by 2008 than do the ment.4 We found that most of the decline least healthy (those in the bottom third in home equity was accounted for by The Role of Health of the distribution). The dollar dif- changes in health status (particularly ferences in wealth accumulation asso- nursing home entry) or the death of a Health care costs are a major finan- ciated with differences in health are spouse. Households that did not experi- cial concern for elderly households. A substantial: for households near the ence these shocks reduced housing equity substantial portion of these costs is median of the wealth distribution in little, if any. Thus households appear to paid for by Medicare. For some house- 1992, the healthiest households accu- conserve equity in homes to tap in the holds Medicaid and private insurance mulated $135,000 more assets by 2008 event of substantial expenses rather than are also important sources of payment. than did the least healthy households. to use this equity for day-to-day con- However, none of these programs cover For households with similar assets who sumption needs. Indeed, when asked in all of the costs of poor health, particu- were in the top asset quintile in 1992, surveys, most households plan, desire, and larly costs associated with long-term the gap between households in the top expect to die in their homes. poor health rather than with specific and bottom thirds of the health distri- More recently we looked at how per- health events. Such costs include expen- bution was over $470,000 by 2008. sonal retirement accounts were drawn ditures associated with home reloca- Poor health can trigger asset draw- down in retirement.5 Unlike housing, tion, home alterations, transportation, down in many ways. The most direct which provides housing services while the need to hire a cleaning service, and pathway is through greater health- also being a store of wealth, personal the like. For these expenses, households related expenditures. However, the retirement accounts are designed and pro- must either pay out of current income effect of poor health and associated moted as a means of saving to finance or spend down assets. expenditures may differ, even among retirement expenditure. We find a rather A complete accounting of all of persons with the same wealth. For modest rate of withdrawal prior to age 70 the costs associated with poor health is example, we show that Social Security 1/2 when households are required to take difficult to obtain. Surveys of out-of- benefits and DB pension benefits can minimum distributions. Only 17 percent pocket medical expenditures typically be “protective” of assets in retirement.8 of households between the ages of 60 fail to elicit all of these costs, especially Among households entering retirement and 69 who own a personal retirement those that are tangentially related costs with the same health and wealth, those account make any withdrawal in a typical of poor health. Moreover, most survey households receiving higher annuity year. The rate of withdrawal rises sharply questions focus on the costs of specific benefits have substantially lower rates after age 70 1/2, suggesting that many health events and do not capture the of asset drawdown. The magnitude of households in their early seventies would continuing effects of poor health on these effects varies considerably by level not make withdrawals if it were not for household expenditures that are likely of wealth, but on average an additional the distribution rules. Even after age 70 to persist well after a specific event $10,000 of Social Security benefits is 1/2, the percentage of assets withdrawn in occurs. We attempt to infer the “full” associated with a $10–15,000 increase
NBER Reporter • 2012 Number 1 17 in assets over the two-year intervals or annuitized to supplement other of the decline in health faced by each between waves of the HRS. sources of income. Moreover, these household, as well as on the presence There are also important differ- households appear to treat their home of annuity income from Social Security ences in the post-retirement asset draw- equity as a source of reserve wealth to or DB pensions that can substitute for down of households with different be tapped in extreme circumstances asset withdrawals. levels of education. Education clearly rather than as a source of income for affects the level of assets a household day-to-day consumption. The mea- accumulates before retirement through ger level of non-housing assets among 1 J. Poterba, S. Venti, and D. Wise, its effect on pre-retirement earnings many households is also, in part, an “The Composition and Drawdown and health. In another paper, we focus explanation for low rates of participa- of Wealth in Retirement,” NBER on two potential routes through which tion in private annuity markets. Many Working Paper No. 17536, October education may affect asset drawdown annuity providers require a minimum 2011. A shorter version appears under after retirement.9 One route is through investment. Forty-three percent of the the same title in Journal of Economic the effect of education on the trajectory households aged 65 to 69 would not Perspectives, 25(4), fall 2011. of health after retirement. The other is be able to make a $25,000 minimum 2 Ibid. through the effect of education on asset investment even if they liquidated all 3 J. Poterba, S. Venti, and D. Wise, allocation and investment returns. It is of their financial assets, including per- “Were They Prepared for Retirement? possible that persons with higher levels sonal retirement accounts. Financial Status at Advanced Ages in of education will earn greater returns on For households that enter retire- the HRS and AHEAD Cohorts,” NBER their investments, either because they ment with substantial assets, the late Working Paper No. 17824, January will choose to allocate their assets differ- life financial planning problem is mul- 2012, presented at an NBER Conference ently, and to hold more risky but higher tifaceted. At least early in retirement, on Aging, Carefree AZ, May 2011. expected return assets, or they will hold households appear reluctant to spend 4 S. Venti and D. Wise, “Aging and assets within each asset class that gener- down assets as predicted by simple life- Housing Equity: Another Look,” ate higher returns, than their counter- cycle models. Surprisingly, households NBER Working Paper No. 8608, parts with lower levels of educational are even reluctant to spend down assets November 2001, and Perspectives in attainment. Analysis of data from sev- held in IRAs, Keoghs, and 401(k) the Economics of Aging, D. Wise, ed. eral HRS cohorts indicates that effect plans — perhaps the assets one might University of Chicago Press, 2004. of education on asset growth through expect households to rely on first to 5 J. Poterba, S. Venti, and D. Wise, both the health and asset return chan- meet consumption needs. Only 17 per- “The Drawdown of Personal Retirement nels is substantial. The effect of educa- cent of persons between the ages of 60 Assets,” NBER Working Paper No. tion on the two-year change in assets and 69 make a withdrawal from a PRA, 16675, January 2011. varies by the initial level of assets and by and even after required minimum dis- 6 J. Poterba, S. Venti, and D. Wise, marital status. For married persons, the tributions begin at age 70 and 1/2, bal- “Family Status Transitions. Latent two-year increase in assets is $15,000 ances in these accounts often continue Health, and the Post-Retirement to $36,000 greater for persons having a to grow with age. For households with Evolution of Assets,” NBER Working college degree than for persons without substantial assets that are observed to Paper No. 15789, February 2010, a high school diploma when both chan- drawdown assets, most of the draw- and Explorations in the Economics nels are combined. down is associated with changes in of Aging, D. Wise, ed., University of family status, such as divorce or wid- Chicago Press, 2011. Summary owhood, and poor health. The long- 7 J. Poterba, S. Venti, and D. Wise, term effect of health on the level of “The Asset Cost of Poor Health,” NBER There is substantial diversity in the assets — what we call the “asset cost” Working Paper No. 16389, September financial circumstances of households of poor health — can be substantial. 2010. entering retirement. This means that Among households with the same ini- 8 J. Poterba, S. Venti, and D. Wise, households in different parts of the tial wealth in 1992, those in the top “The Role of Social Security Benefits in wealth distribution face very different third of the distribution of health accu- the Asset Cost of Poor Health,” draft sub- decisions concerning asset drawdown mulate at least 50 percent more assets mitted to SSA, September 2011. after retirement. We find that for by 2008 than do those in the bot- 9 J. Poterba, S. Venti, and D. Wise, most households in the bottom half tom third. But even among households “Health, Education, and the Post- of the wealth distribution, there is no with the same initial wealth, the asset Retirement Evolution of Household drawdown decision to be made. Other cost of poor health varies substantially. Assets,” prepared for the RAND than housing, these households hold The size of the asset decline clearly Conference on Health, Aging, and few assets that could be drawn down depends on the severity and nature Human Capital, November 2011.
18 NBER Reporter • 2012 Number1 NBER Profile: Leemore Dafny
Leemore Dafny is a Research Associate is an empirical economist whose research in the NBER’s Programs on Health Care focuses on competition in healthcare markets and Aging and an Associate Professor of and the impact of public health insurance Management and Strategy at Northwestern on healthcare costs and quality. Her work University’s Kellogg School of Management. has been published in journals such as the She also co-directs Kellogg’s Ph.D. Program American Economic Review, Journal of Law in Managerial Economics and Strategy, and is and Economics, and the New England Journal a member of the Panel of Health Advisers to of Medicine. She also has advised federal, state, the Congressional Budget Office. and local officials on healthcare reform and Dafny graduated summa cum laude from antitrust matters related to healthcare. Harvard College and earned her Ph.D. in Dafny lives with her husband and three Economics from MIT. She teaches courses children on Chicago’s famed North Shore, in healthcare strategy and empirical meth- which regrettably for the kids is the inspiration ods, and supervises doctoral dissertations in for Tina Fey’s 2006 hit movie, “Mean Girls.” the industrial organization of healthcare. She
NBER Profile: Wolfgang Keller
Wolfgang Keller is a Research Brown, Princeton, and the International Associate in the NBER’s Programs on Monetary Fund’s Research Department. Productivity and International Trade Keller is also a research associate of the and Investment. He is also the Stanford Centre for Economic Policy Research Calderwood Chair of the University of in London. Born and raised in Koblenz, Colorado at Boulder and its Economics Germany, Keller received his Diploma Department. He works on the interface from Freiburg University in 1990 and his of international trade and the econom- Ph.D. from Yale University in 1995, both ics of technology, as well as on issues in in Economics. growth and long-run development, most Keller lives in the mountains near recently in China. Boulder with his wife and frequent co- Keller joined Colorado in 2005, author Carol H. Shiue, also a professor at after having been on the faculty of the Colorado, and their children, Kai (6) and University of Wisconsin at Madison Mia (1). In his spare time, when he is not and the University of Texas at Austin, skiing or biking, Keller likes to eat foreign as well as holding visiting positions at food in situ.
NBER Reporter • 2012 Number 1 19 NBER Profile: James H. Stock
Jim Stock is a Research Associate methods for macroeconomics using very in the NBER’s Programs on Monetary many time series, and econometric infer- Economics, Economic Fluctuations and ence when identification is weak. He was Growth, and Asset Pricing. He is also a elected Fellow of the Econometric Society member of the NBER’s Business Cycle in 1992, and is currently a co-editor of Dating Committee. Econometrica. Stock is currently the Harold Hitchings His Introduction to Econometrics, Burbank Professor of Political Economy in coauthored with Mark Watson, is a lead- the Economics Department at Harvard ing undergraduate econometrics textbook. University, which he chaired from 2006– In 2010, they received the CIRET/FGV 9. He previously served on the faculty of Isaac Kerstenstzky Scholarly Achievement Harvard’s Kennedy School of Government Award. and the University of California, Berkeley. Stock grew up in Minneapolis, Stock received his B.S. in Physics from Yale Minnesota. He lives in Lincoln, Mass University, and an M.A. in Statistics and achusetts with his wife, Anne Doyle, and Ph.D. in Economics from the University two children, Chris and Corey. As a fam- of California, Berkeley. ily, they enjoy outdoor activities includ- Stock’s recent research includes stud- ing camping and cross-country skiing, ies of the Great Moderation and changes and his hobby is coaching youth cross- in the U.S. business cycle, empirical country skiing.
NBER Profile: Mark W. Watson
Mark Watson is a Research Associate a consultant for the Federal Reserve Banks of in the NBER’s Programs on Economic Chicago and Richmond. Fluctuations and Growth and Monetary Watson’s research focuses on time-series Economics and a member of the NBER’s econometrics, empirical macroeconomics, Business Cycle Dating Committee. He is and macroeconomic forecasting. He has pub- also the Howard Harrison and Gabrielle lished articles in these areas and is the author Snyder Beck Professor of Economics and (with James Stock) of Introduction to Public Affairs at Princeton University. Econometrics, a leading undergraduate text- Watson did his undergraduate work at book. He is also a fellow of the American Pierce Junior College and California State Academy of Arts and Sciences and of the University at Northridge, and completed Econometric Society. his Ph.D. at the University of California Watson and his wife Debbie have been at San Diego. Before joining Princeton’s married since 1976 and have two grown chil- Economics and Public Affairs Department dren: a daughter who is a teacher in New York in 1995, he taught at Harvard University City and a son who is a musician in Seattle. and Northwestern University, and spent one He has little time for hobbies, but has been year as a Visiting Associate Professor at the trying to learn karate because, as he puts it, University of Chicago. He has also served as “economics can be a dangerous business.”
20 NBER Reporter • 2012 Number1 NBER Profile: Steven F. Venti
Steven F. Venti is a Research Associate Economics at Harvard University and at in the NBER’s Program on Aging and the the Kennedy School of Government. Venti’s DeWalt H. Ankeny Professor of Economic research focuses on the relationship between Policy and Professor of Economics at tax policy and saving, the effectiveness of Dartmouth College. He received his A.B. saving incentives, housing policy, and how in economics from Boston College and his households accumulate and draw down A.M. and Ph.D. in economics from Harvard wealth. University. Venti and his wife Nancy have two Before joining the Dartmouth faculty, grown children. They enjoy summers on the Venti held positions in the Department of lake and winters on the snow.
Conferences
Causes and Consequences of Corporate Culture
An NBER Conference on the “Causes and Consequences of Corporate Culture” took place in Cambridge on December 8–9, 2011. Luigi Zingales, University of Chicago and NBER, and James Poterba, MIT and NBER, organized the conference. These papers were discussed:
• Serguey Braguinsky, Carnegie Mellon University, and Sergey V. Mityakov, Clemson University, “Foreign Corporations and the Culture of Transparency: Evidence from Russian Administrative Data”
• Yan-Leung Cheung and Aris Stouraitis, Hong Kong Baptist University, and Raghavendra Rau, University of Cambridge, “Which Firms Benefit from Bribes, and by How Much? Evidence from Corruption Cases Worldwide”
• Jason M. DeBacker, Department of the Treasury, and Bradley Heim and Anh Tran, Indiana University, “Importing Corruption Culture from Overseas: Evidence from Corporate Tax Evasion in the United States”
• Lee Biggerstaff and Andy Puckett, University of Tennessee, and David C. Cicero, University of Delaware, “Unethical Executives and Corporate Misbehavior”
• Robert Davidson, Georgetown University; Aiyesha Dey, University of Minnesota; and Abbie Smith, University of Chicago, “Executives’ Off-The-Job Behavior, Corporate Culture, and Financial Reporting Risk”
• Dhananjay Nanda and Peter Wysocki, University of Miami School of Business, “The Relation between Trust and Accounting Quality”
• Robert G. Eccles and George Serafeim, Harvard University, and Ioannis Ioannou, London Business School, “The Impact of a Corporate Culture of Sustainability on Corporate Behavior and Performance”
NBER Reporter • 2012 Number 1 21 • Nicholas Bloom, Stanford University and NBER; Raffaella Sadun, Harvard University and NBER; and John Van Reenen, London School of Economics and NBER, “The Organization of Firms across Countries”
• Mary Margaret Frank and Luann Lynch, University of Virginia; Sonja Olhoft Rego, Indiana University; and Rong Zhao, Drexel University, “Are Aggressive Reporting Practices Indicative of an Aggressive Corporate Culture?”
• Leonce Bargeron, Kenneth M. Lehn, and Jared Smith, University of Pittsburgh, “Corporate Culture and M&A Activity”
• Luigi Guiso, European University Institute; Paola Sapienza, Northwestern University and NBER; and Luigi Zingales, University of Chicago and NBER, “The Value of Corporate Values”
Summaries of these papers may be found at: http://www.nber.org/confer/2011/CCf11/summary.html
Fiscal Policy after the Financial Crisis
An NBER Conference on “Fiscal Policy after the Financial Crisis” took place at Bocconi University in Milan, Italy on December 12–13, 2011. Organizers Alberto Alesina of NBER and Harvard University and Francesco Giavazzi of NBER and Bocconi University chose these papers for discussion:
• Valerie A. Ramey, University of California at San Diego and NBER, “Government Spending and Private Activity”
• Alan J. Auerbach and Yuriy Gorodnichenko, University of California at Berkeley and NBER, “Fiscal Multipliers in Recession and Expansion” (NBER Working Paper No. 17447)
• Francesco Giavazzi, and Michael McMahon, University of Warwick, “The Household Effects of Government Spending”
• Mathias Trabandt, European Central Bank, and Harald Uhlig, University of Chicago and NBER, “How do Laffer Curves Differ Across Countries?”
• William Easterly, New York University and NBER, “The Role of Growth Slowdowns and Forecast Errors in Public Debt Crises”
• Richard Evans and Kerk Phillips, Brigham Young University, and Laurence J. Kotlikoff, Boston University and NBER, “Game Over: Quantifying and Simulating Unsustainable Fiscal Policy”
• Eric M. Leeper, Indiana University and NBER, and Todd B. Walker, Indiana University, “Perceptions and Misperceptions of Fiscal Inflation”
• Ruud de Mooij and Michael Keen, International Monetary Fund, “Tax Reform and Fiscal Policy”
• Pierre Cahuc, Ecole Polytechnique, and Stephane Carcillo, OECD, “Can Public Sector Wage Bills Be Reduced?”
• Axel H. Boersch-Supan, Max Planck Institute for Social Law and Social Policy and NBER, “Entitlement Reforms in Europe: Policy Mixes in the Current Pension Reform Process”
• Roberto Perotti, Universita’ Bocconi and NBER, “The ‘Austerity Myth’: Gain without Pain?” (NBER Working Paper No. 17571)
22 NBER Reporter • 2012 Number1 • Alberto F. Alesina; Dorian Carloni, University of California, Berkeley; and Giampaolo Lecce, Bocconi University “The Electoral Effects of Large Fiscal Adjustments” (NBER Working Paper No. 17655)
• Charles Wyplosz, University of Geneva, “Fiscal Rules”
Summaries of these papers are available at: http://www.nber.org/confer/2011/FPFCf11/summary.html
Thirteenth Annual Conference in India
On December 16–18, 2011 the NBER, along with India’s National Council for Applied Economic Research (NCAER) and the Indian Council for Research on International Economic Relations (ICRIER), sponsored a meeting that included NBER research- ers as well as economists from Indian universities, research institutions, and government departments. NBER Research Associates Abhijit Banerjee of MIT and Raghuram Rajan of the University of Chicago organized the conference jointly with Parthasarathi Shome of ICRIER. The NBER participants, in addition to the organizers, were: Martin Feldstein, Mark Melitz, and Rohini Pande, Harvard University; Marianne Bertrand and Anil K Kashyap, University of Chicago’s Booth School of Business; Anne O. Krueger, Johns Hopkins University; Rob Porter, Northwestern University; Karthik Muralidharan, University of California, San Diego; and Michael Woodford, Columbia University. The topics discussed at the meeting included the prospects for global economic growth and macroeconomic adjustment in the aftermath of the financial crisis, the state of the Indian economy and strategies for continued economic development, environmen- tal policy and climate change, and the role of public policies in health and education.
Standards, Patents, and Innovation
An NBER Conference on Standards, Patents, and Innovation, organized by Timothy Simcoe, NBER and Boston University, Ajay K. Agrawal, NBER and University of Toronto, and Stuart Graham, U.S. Patent & Trademark Office, was held in Tucson, Arizona on January 20–21, 2012. These papers were discussed:
• Emek Basker, University of Missouri, “Raising the Barcode Scanner: Technology and Productivity in the Retail Sector”
• Henry R. Delcamp, Cerna, Mines ParisTech, and Aija Leiponen, Cornell University, “Innovating Standards through Informal Consortia: The Case of Wireless Telecommunications”
• Marco Ceccagnoli, Christopher Forman, and Wen Wen, Georgia Institute of Technology, “Patent Pools, Thickets, and the Open Source Software Entry by Start-Up Firms”
• Joseph A. Clougherty, University of Illinois at Urbana-Champaign, and Michal Grajek, European School of Management and Technology, “International Standards and International Trade: Empirical Evidence from ISO 9000 Diffusion”
• Bernhard Ganglmair, University of Texas at Dallas, and Emanuele Tarantino, University of Bologna, “Patent Disclosure in Standard Setting”
• Kenneth Flamm, University of Texas at Austin, “A Tale of Two Standards: Patent Pools and Innovation in the Optical Disk Drive Industry”
NBER Reporter • 2012 Number 1 23 • Catherine Tucker, MIT and NBER, “Patent Trolls and Technology Diffusion”
• Ryan L. Lampe, DePaul University, and Petra Moser, Stanford University and NBER, “Do Patent Pools Encourage Innovation? Evidence from 20 Industries in the 1930s”
• Hugo Hopenhayn, University of California at Los Angeles and NBER, and Matthew Mitchell, University of Toronto, “Rewarding Duopoly Innovators: The Price of Exclusivity”
• Bhaven Sampat and Scott Hemphill, Columbia University, “Weak Patents Are a Weak Deterrent: Patent Portfolios, the Orange Book Listing Standard, and Generic Entry in Pharmaceuticals”
• Fiona Murray, MIT, and Scott Stern, MIT and NBER, “Learning to Live with Patents: Evolving Norms in Response to Legal Institutional Change”
Summaries of these papers may be found at: http://www.nber.org/confer/2012/IPKE/summary.html
Economics of Digitization
An NBER Conference on the Economics of Digitization took place at Stanford University on February 24, 2012. NBER Research Associates Shane Greenstein of Northwestern University’s Kellogg School of Management, Josh Lerner of the Harvard Business School, and Scott Stern of MIT’s Sloan School, organized the meeting. These papers were discussed:
• Lesley Chiou, Occidental College, and Catherine Tucker, MIT and NBER, “Copyright, Digitization, and Aggregation”
• Monic Sun, Stanford University, and Feng Zhu, University of Southern California, “Ad Revenue and Content Commercialization: Evidence from Blogs”
• Joo Hee Oh, MIT, and Il-Horn Hann, University of Maryland, “Piracy Propagation of Information Goods: Demand and Supply-side Dynamics in P2P Networks”
• Susan Athey, Harvard University and NBER, and Markus Mobius, Iowa State University and NBER, “The Effect of Localization on News Consumption”
• Rachel Soloveichik and David Wasshausen, Bureau of Economic Analysis, “Copyright-Protected Assets in the National Accounts”
• Erik Brynjolfsson, MIT and NBER, and Joo Hee Oh, MIT, “The Attention Economy: Measuring the Value of Free Goods on the Internet”
Summaries of these papers may be found at: http://www.nber.org/confer/2012/EoDs12/summary.html
24 NBER Reporter • 2012 Number1 NBER News
2011 Awards and Honors
A number of NBER researchers received honors, awards, and other forms of professional recognition during 2011 and early 2012. A list of these honors, excluding those that were bestowed by the researcher’s home university and listing researchers in alpha- betical order, is presented below.
John M. Abowd was elected Second year by the Association of Competition distinguished contributions to Regional Vice-president (and will be President in Economics for “A Study of the Internal Science research by scholars who have 2014) of the Society of Labor Economists. Organization of a Bidding Cartel,” recently completed doctoral studies. He was also elected Chair-elect (to be which was published in the American Lucian Bebchuk received the 2011 Chair in 2013) of the American Statistical Economic Review. Award for excellence in corporate gover- Association’ Business and Economic Orazio Attanasio has been elected nance from the International Corporate Statistics Section. Vice President of the European Economic Governance Network (ICGN). He also Viral V. Acharya received the 2011 Association. He will serve as President- was elected President-Elect of the Western Inaugural TCFA (The Chinese Finance Elect of the Association in 2013 and as Economic Association International; Association) Award for the Best Paper President in 2014. and his paper on “Self-Fulfilling Credit on Global Financial Markets. The paper, Alan Auerbach was awarded the Market Freezes” won a 2011 Marshal “The Seeds of a Crisis: A Theory of Daniel M. Holland Medal by the National Blum prize in financial research. Bank Liquidity and Risk Taking over Tax Association in November 2011. The Bo Becker and Victoria Ivashina the Business Cycle”, was co-authored by medal, first awarded in 1993, rewards out- were awarded the Nordea Prize for best Hassan Naqvi. standing contributions to the study and paper on corporate finance at the European Douglas Almond, Joseph Doyle, practice of public finance. Finance Association’s 2011 meeting. Amanda Kowalski, and Heidi Williams Malcolm Baker, Jessica Wachter, Roland Benabou was elected to the won the Garfield Economic Impact Award and Jeffrey Wurgler won the William American Academy of Arts and Sciences. and the Healthcare Cost & Utilization F. Sharpe award for the best paper in Efraim Benmelech and Nittai Project (HCUP) Outstanding Article of the Journal of Financial and Q uanti- Bergman won the Brattle Group’s First the Year Award for their 2010 paper, tative Analysis (along with non-NBER Paper Prize award at the American Finance “Estimating Marginal Returns to Medical coauthor Lubomir Litov.) Baker and Association meetings for their article, Care: Evidence from At-Risk Newborns”, Wurgler also won an Emerald Citation “Bankruptcy and the Collateral Channel.” which was published in the Q uarterly of Excellence Award for writing one of David G. Blanchflower received an Journal of Economics. the top 50 highest-impact articles across Honorary Doctor of Letters (D.Litt), Lee J. Alston served as Vice- 300 management publications. from the University of Sussex. President of the Economic History Michael Baker delivered the Innis Alan Blinder was named a Association in 2010–11. Lecture at the 2011 meetings of the Distinguished Fellow of the American James Andreoni was elected a Fellow Canadian Economics Association. His Economic Association. He was also of the Econometric Society. lecture “Universal Early Childhood the first Robert M. Solow Lecturer Josh Angrist won the John von Interventions: What is the Evidence (other than Solow himself) at the Neumann Award for 2011. The award Base?” was published in the Canadian Urban Institute in May 2011. Blinder is given annually by the Rajk László Journal of Economics in 2011. is a Visiting Scholar at the Russell Sage College for Advanced Studies (Budapest, Katherine Baicker has been elected Foundation in 2011–12. Hungary) to an outstanding scholar in Chair of the Board of Directors of Nick Bloom was elected a Fellow of the social sciences whose works have had AcademyHealth. She was also elected to the Econometric Society. substantial influence over a long period of the Institute of Medicine. George J. Borjas was awarded the time on the studies and intellectual activ- Nathaniel Baum-Snow received IZA (Institute for the Study of Labor) ity of the students of the college. the 2011 Geoffrey J.D. Hewings Award Prize in Labor Economics. John Asker was awarded the prize from the North American Regional Axel Börsch-Supan became a mem- for best paper published in the previous Science Council. The award recognizes ber of the Max-Planck-Society and direc-
NBER Reporter • 2012 Number 1 25 tor of the Max-Planck-Institute of Social years, based on “an individual’s career Roland Fryer, Jr. received a Law and Social Policy in Munich. achievements in outstanding thought lead- MacArthur Foundation Fellowship. Erik Brynjolfsson was selected as a ership in the field of financial economics.” Don Fullerton was appointed to Distinguished Fellow of the INFORMS Esther Duflo won the David N. the AEA’s Committee on the Status Information System Society for his Kershaw Award from The Association for of Minority Groups in the Economics research contribution in the field of infor- Public Policy Analysis and Management Profession (CSMGEP). He also was mation systems. (APPAM). Also, she and Abhijit Banerjee elected Vice President of the Association John Y. Campbell delivered the key- received the Financial Times and Goldman of Environmental and Resource Econo note address to the European Finance Sachs Business Book of the Year Award for mists (AERE). Association meeting in Stockholm, Poor Economics: A Radical Rethinking of Xavier Gabaix won the Fischer Sweden and the Karl Borch Lecture at the Way to Fight Global Poverty. Black Prize, awarded every two years NHH, Bergen, Norway. Steven Durlauf was elected to the by the American Finance Association Murillo Campello received the American Academy of Arts and Sciences. to the person under 40 who contrib- award of “Distinguished Referee” from Susan Dynarksi has been elected uted the most to the field of finance. He the Review of Financial Studies. He to the Association for Public Policy also received the Bernacer Prize for best also received the best paper award at Analysis and Management (APPAM) European economist under 40 work- the European meetings of the Financial Policy Council. APPAM is dedicated ing in macroeconomics/finance, and the Management Association. to improving public policy and manage- Best Young French Economist Prize from Gary Chamberlain was elected a ment by fostering excellence in research, Le Cercle des Economistes / Le Monde. Member of the National Academy of Sciences. analysis, and education. In addition, he was elected a Fellow of James Choi, David Laibson, and William Easterly delivered the Econometric Society. Brigitte Madrian received the TIAA- the Distinguished Guest Lecture Jordi Gali won the National Research CREF Paul A. Samuelson Prize for out- at the Southern Economics Assoc Prize, awarded by the Government of standing scholarly writing on lifelong iation’s Annual Conference on “Does Catalonia (Spain). financial security for their paper “Why Development Economics Cause Econo Alan M. Garber received a MERIT Does the Law of One Price Fail? An mic Development?”. award from the National Institutes of Health. Experiment on Index Mutual Funds.” Alex Edmans won the FIR-PRI Prize for Nicolae Garleanu, Leonid Kogan, Dalton Conley was awarded a the best paper in Finance and Sustainability. and Stavros Panageas received the Best 2011 Guggenheim Fellowship to study Ronald G. Ehrenberg received the Paper Award at the 2011 Utah Winter “genoeconomics” and the problem of Jacob Mincer Award in April 2011 from Finance Conference for their paper on “missing heritability”. the Society of Labor Economists for life- “The Demographics of Innovation and Janet Currie was the Ely Lecturer time contributions to the field of labor Asset Returns”. at the American Economic Association economics. In May 2011, he was awarded Linda S. Goldberg presented the meetings in January 2011. an honorary doctor of humane letters Keynote Address on “Issues in Inter David Cutler and Dana Goldman degree from Pennsylvania State University. national Banking: Research and Policy received the first Silver Scholar Award Barry Eichengreen was selected Initiatives” at the De Nederlandsche from the Alliance for Aging Research in by Foreign Policy Magazine as one of National Bank Conference on Banking fall 2011. The award honors the impor- its 100 influential global thinkers for and the Globalization of Finance in tant work of economists, demographers, 2011. His book Exorbitant Privilege: The Frankfurt, Germany. She also gave a and related researchers whose scholarship Rise and Fall of the Dollar and the Future Keynote Lecture on “The International helps to better value healthy life after 65 of the International Monetary System, Role of the Dollar: Does It Matter if and the medical innovations that help was short-listed for the Financial Times/ This Changes?” at CESifo’s Venice people live longer in good health. Goldman Sachs finance and econom- Summer Institute and the keynote lec- Leemore Dafny was named a mem- ics book of the year, and was selected as ture “In Defense of Global Banking”, at ber of the Congressional Budget Office’s the China economics book of the year the Deutsche Bundesbank Workshop Panel of Health Advisers. for 2011. He also served as president of on “The Costs and Benefits of Angus Deaton was awarded an hon- the Economic History Association in International Banking.” orary Doctorate of Science in Social 2010–11. Claudia Goldin received the Sciences by the University of Edinburgh. Amy Finkelstein was named Doctorate Honoris Causa from Lund Douglas W. Diamond was selected a Young Global Leader by the World University in May 2011. She also was by the American Finance Association to Economic Forum. elected President-elect of the American receive the Morgan Stanley-American Richard G. Frank won the Economic Association in October, assum- Finance Association Award for Excellence Distinguished Services Award from the ing the post at the Society’s Annual in Finance. This honor is given every two Maryland Mental Health Association. Meeting in January 2012.
26 NBER Reporter • 2012 Number1 Marvin Goodfriend was appointed as Fellow of the Econometric Society. Sciences and First Vice-President of the Honorary Advisor, Institute for Monetary Takeo Hoshi received the Reischauer Society of Labor Economists. and Economic Studies, Bank of Japan. International Education Award from the Samuel Kortum was named a Fellow Gita Gopinath was chosen as a Japan Society of San Diego and Tijuana. of the Econometric Society. “Young Global Leader” by the World The award is given to one individual each Amanda Kowalski was selected Economic Forum. year, honoring the outstanding efforts the Okun Model Early Career Fellow Robert J. Gordon was selected by to promote educational interchange and in Economic Studies by the Brookings Economists for Peace and Security as understanding between Japan, San Diego, Institution. their annual dinner honoree at the ASSA and Tijuana. Anne Krueger received an honor- meetings in Chicago in January 2012. He Erik G. Hurst and Tobias J. ary doctorate from Aarhus University was also selected as the keynote speaker Moskowitz shared the Kauffman Prize in Denmark. Also, her 1974 American of a conference co-sponsored by the Medal, which is awarded annually to rec- Economic Review article on “The Political IMF and Danish State National Bank in ognize scholars under the age of 40 whose Economy of the Rent-Seeking Society” Copenhagen in September 2011. research has made a significant contribu- was named, in the February 2011 issue of Yuriy Gorodnichenko won an tion to entrepreneurship. the AER, as one of the twenty outstand- NSF CAREER award for “Analysis of Robert P. Inman was elected ing papers published in the first hundred Prices, Informational Rigidities and Foreign Member, The Royal Norwegian years of that journal. Productivity Differences.” Society of Sciences and Letters, Per Krusell was selected as a Veronica Guerrieri was awarded a Humanities Division. Wallenberg Scholar, one of only ten Sloan Research Fellowship. Takatoshi Ito received the Purple Swedish researchers in all fields selected Robert E. Hall completed his service Ribbon Medal from the Emperor for his in the year. The award provides an unre- as president of the American Economic academic dedication and excellence. stricted research grant. Association (AEA) and became a Seema Jayachandran was awarded Howard Kunreuther and his co- Distinguished Fellow of the AEA. an Alfred P. Sloan Research Fellowship authors Dwight Jaffee and Erwann Daniel Hamermesh received a and an NSF CAREER Grant. Michel-Kerjan received the Spencer L. Humboldt Research Prize from the Michael Jensen won the 2011 Kimball Article Award, presented by German government, one of about 80 Economics for Management Lecture the National Association of Insurance given to non-German researchers in all Series ISES-Fundacion BBVA Prize in Commissioners, for their 2010 paper fields of endeavor each year. May 2011. He previously received the “Long-Term Property Insurance” in the Jeffrey E. Harris was awarded 2009 Morgan Stanley-AFA Award for Journal of Insurance Regulation. He and a grant by the Fulbright Foreign Excellence in Financial Economics, and Michel-Kerjan also received the Kulp- Scholarship Board and the Bureau of selected the NBER, Harvard Business Wright Book Award, presented by the Education and Cultural Affairs of the School, and Simon School of Business at American Risk and Insurance Association U.S. Department of State to serve as a the University of Rochester as co-recipi- for the most influential text on the eco- Fulbright Specialist at the University of ents of the associated cash grant. nomics of risk management and insur- the Republic, Uruguay. He is working Robert Kaestner earned the ance, for At War with the Weather. with a core group of researchers from 2011 Article-of-the-Year honor from David Laibson was elected a Fellow Uruguay on a formal evaluation of that AcademyHealth. of the Econometric Society. country’s tobacco control campaign. Edward Kane received the Thomas Jonathan Lewellen, Stefan Nagel, Oliver D. Hart received an Honorary Divine Award from the Association for and Jay Shanken won the Fama/DFA best Doctorate of Science (Economics) from Social Economics for lifetime contribu- paper prize (second prize) for “A Skeptical London Business School. tions to social economics. He also gave a Appraisal of Asset Pricing Tests.” Eric Hilt was awarded a visiting scholar Keynote Address, “Constraining Growth Christian Leuz and his co-authors fellowship at the Russell Sage Foundation. in Financial Safety Nets: Lessons from Luzi Hall and Peter Wysocki received the Yael Hochberg won the 2011 Emerald Australia and Canada,” at the 9th Biennial AAA/Deloitte Wildman Medal, which Citation of Excellence for “Whom You Pacific Rim Conference of the Western recognizes research judged “to have made Know Matters: Venture Capital Networks Economic Association International in or likely to make the most significant and Investment Performance”, which was Brisbane, Australia. contribution to the advancement of the published in the Journal of Finance. This Louis Kaplow won the Jerry S. practice of public accountancy, includ- award recognizes this paper as one of the Cohen award for antitrust scholarship for ing audit, tax, and management services.” top 50 management business and econom- the article “Why (Ever) Define Markets?” Leuz also won the Allen & Overy Law ics articles with proven impact since publi- Lawrence F. Katz was elected the Prize for a paper in ECGI’s Law working cation in 2007. John Kenneth Galbraith Fellow of the paper series which was deemed to have Thomas J. Holmes was elected a American Academy of Political and Social made the most substantial contribution
NBER Reporter • 2012 Number 1 27 to the knowledge of corporate governance Influential People in 2011” and “50 Top Luigi Pistaferri was awarded a in Europe. Women in Wealth”. European Research Council Starting Frank R. Lichtenberg received an Edward B. Montgomery was elected Grant. He also became Co-Editor of the Outstanding Author Contribution Award to the National Academy of Public American Economic Review, was named at the Emerald Literati Network Awards Administration and appointed to the the Bajola Parisani Visiting Chair in for Excellence for his paper, “The Effect of GAO Comptroller General’s Educator Economics and Institutions at EIEF, Drug Vintage on Survival: Micro Evidence Advisory Panel. Rome, and gave keynote talks at the QED from Puerto Rico’s Medicaid Program,” Randall Morck was named a Frontiers of Macroeconomics Workshop which was published in Advances in Health Research Fellow at the Bank of Canada. (Queen’s University), the CIREQ Macro Economics and Health Services Research. Dale T. Mortensen was awarded an Conference (University of Montreal), Nuno Limao was the plenary ses- honorary Doctor of Sciences degree by and the Stabilization Policies Conference sion speaker at the European Trade Study Willamette University. (University of Copenhagen). Group (ETSG) Conference in September Robert Novy-Marx and Joshua James Poterba was elected Vice- 2011. He also won the 2011 Chair D. Rauh won the Smith Breeden Prize President of the Eastern Economic Jacquemin prize for best paper for “Trade (first place) for the outstanding paper in Association. Policy and Heterogenous Firms. the Journal of Finance in any area other Giorgio Primiceri was selected as an Alexander Ljungqvist was the recipi- than corporate finance, for “Public Alfred P. Sloan Research Fellow. ent of the 2011 Ewing Marion Kauffman Pension Promises, How Big Are They, Valerie Ramey and Neville Francis Prize Medal for Distinguished Research and What Are They Worth?” Novy- won the American Economic Journal: in Entrepreneurship, awarded every two Marx also won the Spangler IQAM Macroeconomics Best Paper Prize in 2011 years to one scholar under age 40 whose Best Paper Price (first place), for the for “A Century of Work and Leisure.” research has made a significant contribu- top paper published in the Review of Helene Rey was elected a Fellow of tion to the literature in entrepreneurship. Finance, for “Operating Leverage.” the British Academy. He also received the Emerald Citations of Nathan Nunn was awarded the Kenneth Rogoff was named the 2011 Excellence Award. 2011 Citation of Excellence Award recipient of the Deutsche Bank Prize in Annamaria Lusardi was elected to for his paper “Relationship-Specificity, Financial Economics for his pioneering the Board of Directors of the Council for Incomplete Contracts, and the Pattern contributions to the field of international Economic Education. of Trade,” published in the Q uarterly finance and macroeconomics. The prize Lisa M. Lynch is president-elect of Journal of Economics. is awarded every other year by the Center the Labor and Employment Research Maurice Obstfeld was the Richard for Financial Economics in Germany. He Association (formerly the Industrial T. Ely Lecturer at the American also received the National Association Relations Research Association). Economic Association’s Annual Meeting for Business Economics’ Adam Smith Jonathan Levin received the John in Chicago in January 2012. He also won Award in 2011. He and Carmen Reinhart Bates Clark Medal from the American the Tjalling C. Koopmans Asset Award received the Arthur Ross Book Award Economic Association. from the Tilburg School of Economics from the Council on Foreign Relations for Ulrike Malmendier was selected into and Management. their book, This Time Is Different. Capital Magazine’s Young Elite (“Top 40 Lee Ohanian was elected a Senior Jesse Rothstein received the John Researchers under 40”). Fellow at the Hoover Institution. T. Dunlop Outstanding Scholar Award, Kalina Manova has received an Daniel Paravisini, Andrew awarded by the Labor and Employment Excellence Award in Global Economic Hertzberg, and Jose Liberti won the Relations Association, for outstanding aca- Affairs from the Kiel Institute for the Brattle Group’s Distinguished Paper Prize demic contributions to research of national World Economy. for their paper “Public Information and significance by a recent entrant to the field. Christopher M. Meissner was the Coordination: Evidence from a Credit Jay Shanken won the Fama/DFA September 2011 winner of the Arthur Registry Expansion.” The Brattle Group 2nd Prize for Capital Markets and H. Cole Prize, awarded by the Economic Prizes are awarded annually for the three Asset Pricing in the Journal of Financial History Association for the best paper pub- best papers in the field of corporate Economics’ best papers contest, 2010, for lished in the Journal of Economic History finance, chosen by the associate editors “A Skeptical Appraisal of Asset-Pricing during the previous year. The paper, co- of The Journal of Finance. Tests”, coauthored by Jonathan Lewellen authored with Michael Huberman, is Mitchell Petersen had “Estimating and Stefan Nagel. “Riding the Wave of Trade: Explaining the Standard Errors in Finance Panel Data Chris Sims and Thomas Sargent Rise of Labor Regulation in the Golden Sets: Comparing Approaches” (NBER were awarded the Sveriges Riksbank Prize Age of Globalization.” Working Paper No. 11280) selected as in Economics in Honor of Alfred Nobel in Olivia S. Mitchell was named one of an Editor’s Choice paper in the Review of October 2011. Investment Advisor Magazine’s “25 Most Financial Studies. Richard H. Steckel was elected a
28 NBER Reporter • 2012 Number1 Fellow of the American Association for of the American Finance Association. Eugene N. White received a Chaire the Advancement of Science. John Van Reenen won the Arrow Prize d’Accueil (Visiting Chaired Professorship) Paula Stephan became a fellow from the International Health Economics in the Domaine d’Intérêt Majeur Sciences of the American Association for the Association for his 2010 Journal of Political Economiques at the Paris School of Advancement of Science (AAAS). Stephan Economy paper with Carol Propper on “Can Economics from the Government of the Ile was honored “for distinguished profes- Pay Regulation Kill? The Impact of Labor de France. sional service and for contributions to the Markets on Hospital Productivity.” He also David A. Wise was named a economics of science, particularly the role won an Excellence in Refereeing Award Distinguished Fellow of the American of foreign-born researchers and the diffu- from the American Economic Review. Economic Association. sion of scientific knowledge.” Edward J. Vytacil was elected a Fellow Bobbi Wolfe delivered the Robert Catherine Tucker was awarded a five- of the Econometric Society. Lampman lecture at the meetings of the year NSF CAREER Award for her research Neng Wang was the Carr and Low Income Workshop of the Institute for on Digital Privacy and Regulation. Stephanie Bettis Distinguished Scholar Research on Poverty and the Fred Gruen Dimitri Vayanos became a managing for the spring semester, 2011, in the Public Lecture at Australian National editor of the Review of Economic Studies, Department of Finance of the W. P. Carey University. and was elected to the Board of Directors School of Business.
Program and Working Group Meetings
Entrepreneurship Group Meets
The NBER’s Working Group on Entrepreneurship met in Cambridge on December 2, 2011. Working Group Directors Josh Lerner of Harvard Business School and Antoinette Schoar of MIT chose these papers for discussion:
• Ola Bengtsson, University of Illinois; Magnus Johannesson, Stockholm School of Economics; and Tino Sanandaji, University of Chicago, “Do Women Have a Less Entrepreneurial Personality?”
• Konrad Burchardi, London School of Economics, and Tarek Alexander Hassan, University of Chicago and NBER, “The Economic Impact of Social Ties: Evidence from German Reunification” (NBER Working Paper No. 17186)
• Luis Garicano, London School of Economics; Claire LeLarge, SESSI; and John Van Reenen, London School of Economics and NBER, “Firm Size Distortions and the Productivity Distribution: Evidence from France”
• Luis Cabral, New York University, “Good Turnover and Bad Turnover: Barriers to Business and Productivity”
• Thomas J. Chemmanur, Boston College; Elena Loutskina, University of Virginia; and Xuan Tian, Indiana University, “Corporate Venture Capital, Value Creation, and Innovation”
• Deepak Hegde, New York University, and Justin Tumlinson, Ifo Institute at the University of Munich, “Can Birds of a Feather Fly Together? Evidence For the Economic Payoffs of Ethnic Homophily”
Summaries of these papers may be found at: http://www.nber.org/confer/2011/ENTf11/summary.html
NBER Reporter • 2012 Number 1 29 International Trade and Investment
The NBER’s Program on International Trade and Investment met at Stanford’s Institute for Economic Policy Research on December 2 and 3, 2011. Program Director Robert C. Feenstra of the University of California, Davis organized the meeting. These papers were discussed: • James Harrigan, University of Virginia and NBER, and Ariell Reshef, University of Virginia, “Skill Biased Heterogeneous Firms, Trade Liberalization, and the Skill Premium” (NBER Working Paper No. 17604) • Thomas Sampson, London School of Economics, “Selection into Trade and Wage Inequality” • Ariel Burstein, University of California at Los Angeles and NBER, and Javier Cravino, University of California at Los Angeles, “Measured Aggregate Gains from International Trade” • Costas Arkolakis, Yale University and NBER; Natalia Ramondo, Arizona State University; Andrés Rodríguez-Clare, University of California, Berkeley and NBER; and Stephen Yeaple, Pennsylvania State University and NBER, “Innovation and Production in the Global Economy” • Ralph Ossa, University of Chicago and NBER, “Trade Wars and Trade Talks with Data” (NBER Working Paper No. 17347) • Julian di Giovanni, International Monetary Fund; Andrei Levchenko, University of Michigan and NBER; and Jing Zhang, University of Michigan, “The Global Welfare Impact of China: Trade Integration and Technological Change” • Jiandong Ju, University of Oklahoma; Kang Shi, Chinese University of Hong Kong; and Shang-Jin Wei, Columbia University and NBER, “Trade Liberalizations and Global Current Account Imbalances” • Yue Ma, Lingnan University; Heiwai Tang, Tufts University; andYifan Zhang, Lingnan University, “Factor Intensity, Product Switching, and Productivity: Evidence from Chinese Exporters” Summaries of these papers may be found at: www.nber.org/confer/2011/ITIf11/summary.html
Household Finance Working Group
The NBER’s Working Group on Household Finance, directed by Brigitte C. Madrian of Harvard University’s Kennedy School of Government and Nicholas S. Souleles of University of Pennsylvania’s Wharton School, met in Cambridge on December 16, 2011. The group discussed these papers:
• James J. Choi, Yale University and NBER; Emily Haisley, Barclays Bank PLC; Jennifer Kurkoski, Google, Inc.; and Cade Massey, Yale University, “Small Cues Change Savings Choices”
• Victor Stango, University of California at Davis, and Jonathan Zinman, Dartmouth College and NBER, “Borrowing High vs. Borrowing Higher: Sources and Consequences of Dispersion in Individual Borrowing Costs”
• Justine S. Hastings, Brown University and NBER, and Ali Hortacsu and Chad Syverson, University of Chicago and NBER, “Advertising and Competition in Privatized Social Security: The Case of Mexico”
• Raymond Fisman, Columbia University and NBER; Daniel Paravisini, Columbia University and NBER; and Vikrant Vig, London Business School, “Social Proximity and Loan Outcomes: Evidence from an Indian Bank”
• Manuel Adelino, Dartmouth College; Antoinette Schoar, MIT and NBER; and Felipe Severino, MIT, “Credit Supply and House Prices: Evidence from Mortgage Market Segmentation”
• Lee Lockwood, University of Chicago, “Incidental Bequests: Bequest Motives and the Choice to Self-Insure Late-Life Risks”
Summaries of these papers may be found at: http://www.nber.org/confer/2011/HFf11/summary.html
30 NBER Reporter • 2012 Number1 Market Microstructure Meeting
The NBER’s Working Group on Market Microstructure met in Cambridge on December 16, 2011. Tarun Chordia and Amit Goyal, Emory University; Charles Jones, Columbia Business School; Bruce Lehmann, University of California, San Diego and NBER; and Avanidhar Subrahmanyam, University of California, San Diego, organized the program. These papers were discussed:
• Albert Menkveld, VU University Amsterdam, “High Frequency Trading and the New-Market Makers”
• Paolo Pasquariello, University of Michigan, and Clara Vega, Federal Reserve Board, “Government Intervention and Strategic Trading in the U.S. Treasury Market”
• Zhiguo He, University of Chicago, and Konstantin Milbradt, MIT, “Endogenous Liquidity and Defaultable Bonds”
• James E. Upson, University of Texas at El Paso, and Thomas H. McInish, University of Memphis, “Strategic Liquidity Supply in a Market with Fast and Slow Traders”
• Lawrence Harris, University of Southern California, “The Homogenization of U.S. Equity Trading”
• Maureen O’Hara, Cornell University, and Mao Ye and Chen Yao, University of Illinois, “What’s Not There: The Odd- Lot Bias in TAQ Data”
Summaries of these papers may be found at: http://www.nber.org/confer/2011/MMf11/summary.html
Economic Fluctuations and Growth Research Meeting
The NBER’s Program on Economic Fluctuations and Growth met at the Federal Reserve Bank of San Francisco on February 3, 2012. NBER Research Associates Nir Jaimovich of Duke University and Guido Lorenzoni of MIT organized the meeting. These papers were discussed:
• Gary B. Gorton, Yale University and NBER, and Guillermo Ordonez, Yale University, “Collateral Crises” (NBER Working Paper No. 17771)
• Elias Albagli, University of Southern California; Christian Hellwig, Toulouse School of Economics; and Aleh Tsyvinski, Yale University and NBER, “A Theory of Asset Prices based on Heterogeneous Information” (NBER Working Paper No. 17548)
• Francisco Buera, Federal Reserve Bank of Minneapolis and NBER; Joseph Kaboski, University of Notre Dame and NBER; and Yongseok Shin, Washington University in St. Louis, “The Macroeconomics of Microfinance”
• Cosmin Ilut, Duke University, and Martin Schneider, Stanford University and NBER, “Ambiguous Business Cycles”
• Ulrike Malmendier, University of California, Berkeley and NBER, and Stefan Nagel, Stanford University and NBER, “Learning from Inflation Experiences”
• Greg Kaplan, University of Pennsylvania, and Giovanni L. Violante, New York University and NBER, “A Model of the Consumption Response to Fiscal Stimulus Payments” (NBER Working Paper No. 17338)
Summaries of these papers may be found at: http://www.nber.org/confer/2012/EFGw12/summary.html
NBER Reporter • 2012 Number 1 31 Industrial Organization Program Meeting
The NBER’s Program on Industrial Organization, directed by Nancy Rose of MIT, met in Stanford, CA on February 10 and 11, 2012. Timothy F. Bresnahan, Stanford University, and Jakub Kastl, NBER and Stanford University, organized the meeting. These papers were discussed:
• Fernando Ferreira, University of Pennsylvania and NBER, and Amil Petrin and Joel Waldfogel, University of Minnesota and NBER, “Trade and Welfare in Motion Pictures”
• Jennifer Brown, Northwestern University and NBER, and Dylan B. Minor, Northwestern University “Selecting the Best? Spillover and Shadows in Elimination Tournaments” (NBER Working Paper No. 17639)
• Brian Viard, Cheung Kong Graduate School of Business, and Shihe Fu, “The Effect of Beijing’s Driving Restrictions on Pollution and Economic Activity”
• Abe Dunn and Adam Hale Shapiro, Bureau of Economic Analysis, “Physician Market Power and Medical-Care Expenditures”
• Jason Allen, Bank of Canada; Robert Clark, HEC Montreal; and Jean-Francois Houde, University of Wisconsin, Madison, “Price Negotiation in Differentiated Product Markets: The Case of Insured Mortgages in Canada”
• Carlos E. Noton, University of Warwick, “Revealing Bargaining Power through Actual Wholesale Prices”
• Liran Einav, Stanford University and NBER; Theresa Kuchler, Stanford University; Jonathan D. Levin, Stanford University and NBER; and Neel Sundaresan, eBay Research Labs, “Learning from Seller Experiments in Online Markets” (NBER Working Paper No. 17385)
Summaries of these papers may be found at: http://www.nber.org/~confer/2012/IOs12/summary.htm
Law and Economics
The NBER’s Program on Law and Economics, directed by Christine Jolls of Yale Law School, met in Cambridge on February 10, 2012. These papers were discussed:
• Zhiguo He, University of Chicago, and Gregor Matvos, University of Chicago and NBER, “Debt and Creative Destruction: Why Could Subsidizing Corporate Debt Be Optimal?”
• Alberto F. Alesina, Harvard University and NBER; Yann Algan, Sciences Po; Pierre Cahuc, Ecole Polytechnique; and Paola Giuliano, University of California, Los Angeles and NBER, “Family Values and the Regulation of Labor” (NBER Working Paper No. 15747)
• Ernst Fehr, University of Zurich; Oliver D. Hart, Harvard University and NBER; and Christian Zehnder, University of Lausanne, “How Do Informal Agreements and Renegotiation Shape Contractual Reference Points?” (NBER Working Paper No. 17545)
• Steven Shavell, Harvard University and NBER, “A Fundamental Enforcement Cost Advantage of the Negligence Rule over Regulation”
32 NBER Reporter • 2012 Number1 Special Session on Consumer Finance
• Santosh Anagol, University of Pennsylvania, and Shawn Cole and Shayak Sarkar, Harvard University, “Understanding the Incentives of Commissions Motivated Agents: Theory and Evidence from the Indian Life Insurance Market”
• Will Dobbie, Harvard University, and Paige M. Skiba, Vanderbilt University, “Information Asymmetries in Consumer Credit Markets: Evidence from Payday Lending”
• Dean Karlan, Yale University and NBER, and Jonathan Zinman, Dartmouth College and NBER, “Borrow Less Tomorrow”
Summaries of these papers may be found at: http://www.nber.org/confer/2012/LEs12/summary.html
Labor Studies Program Meeting
The NBER’s Program on Labor Studies, directed by David Card of the University of California, Berkeley, met at the Federal Reserve Bank of San Francisco on February 24, 2012. These papers were discussed:
• Mary Daly and Bart Hobijn, Federal Reserve Bank of San Francisco, and Theodore Wiles, The Analysis Group, “Aggregate Real Wages: Macro Fluctuations and Micro Drivers”
• John M. Abowd, Cornell University and NBER, and Ian M. Schmutte, University of Georgia, “Endogenous Mobility”
• Johannes Schmieder, Boston University; Till M. von Wachter, Columbia University and NBER; and Stefan Bender, Institute for Employment Research, “The ffE ect of Unemployment Insurance Extensions on Reemployment Wages”
• Gregorio S. Caetano, University of Rochester, and Vikram Maheshri, University of Houston, “School Segregation and the Identification of Tipping Points”
• Thomas Buser and Hessel Oosterbeek, University of Amsterdam, and Muriel Niederle, Stanford University and NBER, “Gender, Competition and Career Choices”
• Ernesto Dal Bo, University of California at Berkeley and NBER; Frederico Finan, University of California, Berkeley; and Martin Rossi, Universidad de San Andres, “Strengthening State Capabilities: The Role of Financial Incentives in the Call to Public Service”
• Eric A. Hanushek, Stanford University and NBER; Ludger Woessmann, University of Munich; and Lei Zhang, Tsinghua University, “General Education, Vocational Education, and Labor-Market Outcomes over the Life-Cycle” (NBER Working Paper No.17504)
Summaries of these papers may be found at: http://www.nber.org/confer/2012/LSs12/summary.html
Monetary Economics Program Meeting
The NBER’s Monetary Economics Program met at the Federal Reserve Bank of New York on March 2, 2012. NBER Research Associates Ricardo Reis of Columbia University and Mark W. Watson of Princeton University organized this program:
• Markus K. Brunnermeier, Princeton University and NBER, and Yuliy Sannikov, Princeton University, “The I Theory of Money”
NBER Reporter • 2012 Number 1 33 • Jesus Fernandez-Villaverde, University of Pennsylvania and NBER; Pablo A. Guerrón-Quintana, North Carolina State University; Keith Kuester, Federal Reserve Bank of Philadelphia; and Juan Rubio-Ramírez, Duke University, “Fiscal Volatility Shocks and Economic Activity”
• Emmanuel Farhi and Gita Gopinath, Harvard University and NBER, and Oleg Itskhoki, Princeton University and NBER, “Fiscal Devaluations” • Eric T. Swanson and John Williams, Federal Reserve Bank of San Francisco, “Measuring the Effect of the Zero Lower Bound on Medium- and Longer-Term Interest Rates” • Fernando E. Alvarez, University of Chicago and NBER, and Francesco Lippi, University of Sassari, “Price Setting with Menu Cost for Multi-product Firms” • Carola Frydman, Boston University and NBER, and Eric Hilt, Wellesley College and NBER, “The Panic of 1907: JP Morgan, Trust Companies, and the Impact of the Financial Crisis”
Summaries of these papers may be found at: http://www.nber.org/confer/2012/MEs12/summary.html
International Finance and Macroeconomics Program Meeting
The NBER’s Program on International Finance and Macroeconomics met in Cambridge on March 9, 2012. NBER Research Associates Kristin Forbes of MIT and Helene Rey of London Business School organized the meeting. These papers were discussed:
• Jack Favilukis, London School of Economics, and Sydney C. Ludvigson and Stijn Van Nieuwerburgh, New York University and NBER, “Foreign Ownership of U.S. Safe Assets: Good or Bad?”
• Matteo Maggiori, University of California, Berkeley, “Financial Intermediation, International Risk Sharing, and Reserve Currencies”
• Gabriel Zucman, Paris School of Economics, “The Missing Wealth of Nations: Are Europe and the U.S. Net Debtors or Net Creditors?”
• Marcel Fratzscher, Marco Lo Duca, and Roland Straub, European Central Bank, “Quantitative Easing, Portfolio Choice and International Capital Flows”
• Viral V. Acharya, New York University and NBER, and Raghuram Rajan, University of Chicago and NBER, “Sovereign Debt, Government Myopia and the Financial Sector”
• Robin Greenwood, Harvard University and NBER; Augustin Landier, Toulouse School of Economics; and David Thesmar, HEC Paris, “Vulnerable Banks”
• Meghana Ayyagari, George Washington University; Asli Demirguc-Kunt, The World Bank; and Vojislav Maksimovic, University of Maryland, “Do Phoenix Miracles Exist? Role of Financial Markets in Firm-Level Recovery from Financial Crises”
Summaries of these papers may be found at http://www.nber.org/confer/2012/IFMs12/summary.html
34 NBER Reporter • 2012 Number1 Bureau Books
The following two volumes may be ordered directly from the University of Chicago Press Distribution Center, at Telephone: 1-800-621-2736 Email: [email protected]
For more information on ordering and electronic distribution, see http://www.press.uchicago.edu/Misc/Chicago/infopage.html
The Intended and Unintended Effects of U.S. Agricultural and Biotechnology Policies
The Intended and Unintended Effects farmers but often benefit crop proces- markets. The volume is available from the of U.S. Agricultural and Biotechnology sors instead; how the demand for biofuel University of Chicago Press for $99.00. Policies, edited by Joshua S. Graff Zivin could create uncertainty around agricul- Graff Zivin is an NBER Research and Jeffrey M. Perloff, is an NBER tural prices; the ways in which genetically Associate and Associate Professor of Conference Report that examines a wide engineered crops might affect the com- Economics at the University of Cal range of policy issues that surround U.S. peting goals of energy production, envi- ifornia, San Diego. Perloff is a former agriculture and the biofuel industry. ronmental protection, and maintenance member of NBER’s Board of Directors Among the topics addressed are: how of the global food supply; and how the and a Professor in the Agricultural and funds distributed by agricultural insur- growing availability of genetically-engi- Resource Economics Department at the ance programs were created to support neering food products affects world food University of California, Berkeley.
The Rate and Direction of Inventive Activity Revisited
The Rate and Direction of Inventive environment for innovation; the effect and Entrepreneurship. Stern is director of Activity Revisited, edited by Josh of public and private research funding on the NBER’s Innovation Policy Working Lerner and Scott Stern, is an NBER the rate of scientific progress; and how Group; both Lerner and Stern are NBER Conference Report that addresses a range “open research” and the diffusion of infor- Research Associates. Lerner is also the of fundamental questions about the eco- mation technology can influence knowl- Jacob H. Schiff Professor of Investment nomics of innovation and technologi- edge accumulation more generally. The Banking at Harvard Business School. Stern cal change. Among the topics discussed volume is available from the University of is Distinguished Professor of Techno are how institutions such as universities, Chicago Press for $120.00. logical Innovation, Entrepreneurship, and the environment surrounding patent pol- Lerner is a co-director of the NBER’s Strategic Management at MIT’s Sloan icy, and other factors together affect the Program on Productivity, Innovation, School of Management.
NBER Reporter • 2012 Number 1 35 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
Change Service Requested