NBER Reporter NATIONAL BUREAU OF ECONOMIC RESEARCH

Reporter OnLine at: www.nber.org/reporter 2013 Number 1

Program Report

IN THIS ISSUE Program Report Labor Studies Labor Studies 1

Research Summaries David Card* “Understanding Financial Crises” 5 “The Age of Mass Migration” 9 Saving in Developing Countries 12 “Climate Change and Biofuel Mandates” 15 The Labor Studies (LS) Program is one of the largest and most active in the NBER, with almost 150 members producing nearly 200 Working Papers each year. The breadth of topics and expertise is stun- NBER Profiles 18 ning: it ranges from cutting edge research on aggregate labor market Conferences 20 issues like unemployment and productivity to the effects of govern- NBER News 23 ment programs like Disability Insurance, the differences in labor mar- Program and Working Group Meetings 27 ket outcomes among different educational, gender, and racial groups, Bureau Books 31 and to many other topics in social science. Reflecting their diversity, two-thirds of program members are affiliated with at least one other NBER program, and in the past few years the Labor Studies program has convened joint sessions at the NBER’s Summer Institute with Public Economics, Economics of Education, Economics of Children, and with Working Groups in Personnel Economics and the Economics of Crime. This summer we will add a new joint session with Development Economics. In this report I briefly summarize some of the main themes emerg- ing from recent work by LS affiliates in three areas: immigration, gen- der, and unemployment. These topics barely scratch the surface of the vast body of work by LS affiliates, but give a flavor of some of the emerging ideas and latest techniques in the field. Immigration

Over the past three decades, Labor Studies researchers have pro- duced a series of major NBER research volumes on the economics of immigration (Abowd and Freeman, 1991; Borjas and Freeman, 1992; Borjas, 2000; and Borjas 2007) as well as many influential articles.

* Card directs the NBER’s Program on Labor Studies and is the Class of 1950 Professor of Economics at the University of California, Berkeley. His Profile appears later in this issue. In this article, the numbers in parentheses refer to NBER Working Papers.

NBER Reporter • 2013 Number 1 This work continues with a focus on several new issues related to immigration. NBER Reporter One such issue relates to the growing importance of immigrants in the science and engineering workforce of the United States, particularly at the doctoral level, where immi- grants now make up about one-half of all The National Bureau of Economic Research is a private, nonprofit research orga- newly awarded Ph.D.s. John Bound, Sarah nization founded in 1920 and devoted to objective quantitative analysis of the American economy. Its officers and board of directors are: Turner, and Patrick Walsh (14792) point out that this has been driven in part by the rapid President and Chief Executive Officer — James M. Poterba Controller — Kelly Horak rise in the production of bachelors’ degrees outside the United States, and they document BOARD OF DIRECTORS its impact on the demand for advanced train- Chairman — Kathleen B. Cooper ing inside the United States. Jeffrey Grogger Vice Chairman — Martin B. Zimmerman and Gordon Hanson (18780) use data from Treasurer — Robert Mednick the Survey of Earned Doctorates to study the DIRECTORS AT LARGE determinants of which foreign-born students Peter Aldrich Mohamed El-Erian Michael H. Moskow intend to stay in the United States. They find Elizabeth E. Bailey Linda Ewing Alicia H. Munnell that the United States attracts the most tal- John Herron Biggs Jacob A. Frenkel Robert T. Parry John S. Clarkeson Judith M. Gueron James M. Poterba ented foreign students, and they also show Don R. Conlan Robert S. Hamada John S. Reed how changing economic conditions in send- Kathleen B. Cooper Peter Blair Henry Marina v. N. Whitman ing countries affect the decision to stay. Using Charles H. Dallara Karen N. Horn Martin B. Zimmerman George C. Eads John Lipsky a unique survey of authors of recent scientific Jessica P. Einhorn Laurence H. Meyer publications, Paula Stephan, Chiara Franzoni, and Giuseppe Scellato (18809) find that high DIRECTORS BY UNIVERSITY APPOINTMENT prestige of the program or job and strong George Akerlof, California, Berkeley Mark Grinblatt, California, Los Angeles career prospects are the major factors driving Jagdish W. Bhagwati, Columbia Bruce Hansen, Wisconsin Timothy Bresnahan, Stanford Marjorie B. McElroy, Duke the decisions of Ph.D. students and post-doc- Alan V. Deardorff, Michigan Joel Mokyr, Northwestern toral candidates to choose the United States Ray C. Fair, Yale Andrew Postlewaite, Pennsylvania over other potential host countries. Franklin Fisher, MIT Uwe E. Reinhardt, Princeton Edward Foster, Minnesota David B. Yoffie, Harvard The impact of these foreign born sci- John P. Gould, Chicago entists, engineers, and other highly trained DIRECTORS BY APPOINTMENT OF OTHER ORGANIZATIONS workers is the subject of several recent studies. Christopher Carroll, American Statistical Association William Kerr and William Lincoln (15768) Jean Paul Chavas, Agricultural and Applied Economics Association use data from the H-1B visa program to study Martin Gruber, American Finance Association the city-level and firm-level impacts of for- Ellen Hughes-Cromwick, National Association for Business Economics Thea Lee, American Federation of Labor and eign-born science and engineering workers. Congress of Industrial Organizations While a traditional concern is that the for- William W. Lewis, Committee for Economic Development eign-born tend to crowd out natives, their Robert Mednick, American Institute of Certified Public Accountants Alan L. Olmstead, Economic History Association analysis suggests that the opposite may be Peter L. Rousseau, American Economic Association true, in part because of the direct employ- Gregor W. Smith, Canadian Economics Association ment contribution of foreign born inven- Bart van Ark, The Conference Board tors. George Borjas and Kirk Doran, who The NBER depends on funding from individuals, corporations, and private foun- study the inflow of Russian mathematicians dations to maintain its independence and its flexibility in choosing its research to U.S. universities following the collapse of activities. Inquiries concerning contributions may be addressed to James M. Poterba, President & CEO, NBER 1050 Massachusetts Avenue, Cambridge, MA the Soviet Union (17800), reach the oppo- 02138-5398. All contributions to the NBER are tax deductible. site conclusion. Their analysis of publications The Reporter is issued for informational purposes and has not been reviewed by and career mobility suggests that, in the case the Board of Directors of the NBER. It is not copyrighted and can be freely repro- of advanced-level mathematics, the “pie” is duced with appropriate attribution of source. Please provide the NBER’s Public essentially fixed, with no positive spillovers Information Department with copies of anything reproduced. for native scholars. Requests for subscriptions, changes of address, and cancellations should be sent Another emerging strand of research by to Reporter, National Bureau of Economic Research, Inc., 1050 Massachusetts Avenue, Cambridge, MA 02138-5398. Please include the current mailing label. LS members focuses on the broader impacts of immigration flows on local and national

2 NBER Reporter • 2013 Number 1 economies. Frederic Docquier, Caglar Much recent attention has focused on More recent cohorts of women also Ozden, and Giovanni Peri (16646) the dramatic reversal of the gender gap have narrowed the gap in cumulative use new data on labor force stocks in educational attainment. As docu- labor market experience relative to men. and migration flows by education level mented by Claudia Goldin, Lawrence Martha Bailey, Brad Hershbein, and for OECD countries, combined with Katz, and Ilyana Kuziemko (12139), Amalia Miller (17922) show that some detailed models of the labor markets female high school graduates had nar- of this increase in career attachment was in each country, to simulate impacts of rowed the differences with their male due to easier access to birth control and population movements on a country- peers in achievement test scores, and lower early fertility. Raquel Fernandez by-country basis. They conclude that were more likely to attend and graduate and Joyce Cheng Wong (17508) high- immigration has been a net positive from college, by the early 1990s. Blau, light the effect of the rising risk of factor for workers in most countries. Peter Brummund, and Albert Yung-Hsu divorce on women’s decisions to acquire Francine Blau and Lawrence Kahn Liu (17993) show that this sharp rise in more education and stay attached to the (18515) similarly review the effects of relative education of women correlates labor market. immigration on the overall distribu- with a decline in occupational segrega- The rise in the relative success of tion of incomes in the United States tion between male and female workers, women also may have been helped along and other major countries. They con- as more educated women have entered by a decline in the demand for the man- clude that the presence of immigrants traditionally male occupations. ual skills traditionally supplied by less- has contributed to wage inequality, While women are more likely to educated men. Paul Beaudry and Lewis although the effect is small relative to attend and complete college than men, (18159) show that in cities where the other forces, such as technology and there are still large differences in fields college-high school wage gap has risen trade. Peri (17570) similarly concludes of study. Joseph Altonji, Erica Blom, more quickly, the male-female wage that immigration has had little effect and Costas Meghir (17985) use data gap has narrowed more quickly. They on poverty rates in the United States. on field of degree in the American then show that both trends were corre- Language skills have long been rec- Community Survey to document that lated with more rapid local adoption of ognized as a major factor in understand- women are under-represented in engi- computer technology in the 1980s and ing differences between natives and neering, computer science, physics, eco- 1990s, underscoring the role of chang- immigrants, and several recent NBER nomics, and business, but over-repre- ing relative skill demand. Similarly, Working Papers explore the impacts sented in communications, psychology, Chinhui Juhn, Gergely Ujhelyi, and of language ability among immigrants. education, and English. The latter fields Carolina Villegas-Sanchez (18106) Jennifer Hunt (18696) finds that the are associated with lower earnings for show that passage of NAFTA led lack of English language skills accounts both men and women. These research- Mexican firms to adopt new technolo- for most of the pay gap between natives ers show that differences in college gies that reduced the demand for physi- and immigrants with an undergradu- major choices are an important contrib- cal skills and ultimately led to increased ate degree in engineering. Ethan Lewis utor to the earnings disparities between hiring of women relative to men. (17609) shows that differences in lan- college-educated men and women. Despite the progress made by guage skills lead to a segmentation of One factor that may explain some recent cohorts, women still fall behind the occupations held by immigrants of the gender gap in education choices, men, particularly in certain fields like and natives. The segmentation is most career progression, and pay is a dif- science and engineering, and in high- apparent in cities with large fractions ference in “competitiveness.” Muriel profile careers in management and of Spanish speakers. In the extreme case Niederle and Lise Vesterlund (11474) business. Marianne Bertrand, Goldin, of Puerto Rico, Lewis finds that immi- conducted a series of laboratory experi- and Katz (14681) study MBA gradu- grants and natives are in much more ments to gauge willingness to compete ates from a top U.S. school, and show direct labor market competition. in tournament-like competitions, and that the male-female earnings gap wid- found sharp differences between men ens steadily after initial completion Gender and women that remain even after con- of the degree, reaching 80 percentage trolling for risk aversion and over-opti- points over 16 years. They find that the Members of the LS program have mism. Thomas Buser, Niederle, and presence of children is a powerful pre- played a preeminent role in research on Hessel Oosternbeek (18576) correlate dictor of career interruptions and lower gender-related issues for many decades. similar measures for students in the hours for females, but not for men, and Though the wide disparities in the labor Netherlands, and show that differences that these factors are highly related to market status of men and women that in competitiveness help to explain the earnings. Ty Wilde, Lily Batchelder, characterized earlier generations have lower fraction of girls who choose the and David Ellwood (16582) reach a narrowed, many differences remain, and most prestigious (science-based) track similar conclusion for a broader sam- in some cases new gaps have opened up. at high school. ple of women in the 1979 National

NBER Reporter • 2013 Number 1 3 Longitudinal Survey of Youth: child- vide a systematic analysis of the rel- ployment is that workers become less bearing has a strong negative effect on ative impact of the Great Recession likely to find a new job, either because wage growth, particularly for higher- across various demographic groups. of real or perceived deterioration in skilled women. Their research, based on monthly data their skills. Kory Kroft, Fabian Lange, from the Current Population Survey, and Mathew Notowidigdo (18387) Unemployment, Job Displace­ shows that the relative responses to the conduct an ingenious field experiment ment, and the Great Recession most recent downturn were quite con- to measure this effect. They submit fic- sistent with patterns in earlier reces- titious job resumes to a large sample The Great Recession has brought sions but larger in magnitude, reflect- of job postings in different U.S. cit- renewed interest in the study of labor ing the severity of the downturn. One ies, randomly varying the length of market fluctuations, unemployment, of the least affected groups was older time the (fictitious) applicant has been and job displacement. While research is workers — a fact confirmed by Alan out of work. They find that applicants still ongoing, prominent contributions Gustmann, Thomas Steinmeier, and who have been out of work longer are by LS members already have shed light Nahid Tabatabai (17547) based on data less likely to be called for an interview, on the labor market impacts of the Great from the Health and Retirement Survey. although the effects are moderated in Recession and its likely consequences. Steven Davis and Till von Wachter cities with higher unemployment rates. Michael Elsby, Bart Hobijn, and (17638) evaluate the longer-run costs An important policy response Ayesegul Sahin (15979) provide an of the massive job losses during the to the Great Recession was a large early analysis of the labor market con- Great Recession. Using data from increase in the potential duration of sequences of the downturn that began Social Security earnings records for job unemployment benefits — from the in 2007. They note that the impact of losers in the 1970s, 1980s, and 1990s, standard 26 weeks to as long as 99 the recession was particularly severe they estimate that a “typical” displaced weeks for job losers in some states. for men, who were disproportionately worker (a male with three or more years Jesse Rothstein (17534) uses month- affected by job losses in construction of job tenure, laid off from a firm expe- to-month labor force transition data and manufacturing. They also high- riencing a 30 percent or larger cut in from the Current Population Survey to light the remarkable growth in long- employment) experienced about a 12 evaluate the impact of these longer ben- term unemployment which is one of percent loss in the discounted present efits on re-employment rates and over- the hallmarks of the Great Recession. value of earnings over the next 20 or all unemployment. Using a variety of Henry Farber (17040) used data from so years. The loss rises to 20 percent, approaches to control for unobserved the Displaced Worker Survey of January however, when the overall unemploy- variation in local labor market condi- 2010 to show that nearly one in six U.S. ment rate is greater than 8 percent at tions, he concludes that the package workers reported having lost a job dur- displacement. These estimates suggest of benefit extensions raised the unem- ing 2007–9. Comparing recent job los- that the longer-run costs of the Great ployment rate in December 2010 by at ers to those in earlier surveys, he noted Recession will be very large, and that most 0.5 percentage points — a smaller a sharp decline in re-employment rates many job losers will never see their sala- effect than would have been expected and a rise in measured earnings losses. ries rebound to their pre-job-loss levels. given existing estimates of the effect Hilary Hoynes, Douglas Miller, One potential mechanism account- of longer benefits on the duration of and Jessamyn Schaller (17951) pro- ing for the high cost of long-term unem- unemployment claims in the literature.

4 NBER Reporter • 2013 Number 1 Research Summaries

Understanding Financial Crises: Theory and Evidence from the Crisis of 2007–8

Viral Acharya*

For those who study economic his- considering the problem of the financier the coincidence of short-term debt in the tory, financial crises are recurring phe- who funds a bank but, because of infor- capital structures of banks and related nomena, not as rare as they are often mation problems, lacks precise knowl- financial firms and aggregate shocks to perceived to be, but showing up in new edge and contractibility over loans made their asset portfolios. Regulation might guises each time. There are often com- by the bank. The financier responds to attempt to address this market failure with mon economic forces at work across dif- this problem by saving the option not to a “tax” — for example, a requirement that a ferent crises, and my current research roll over — in other words, by providing bank hold a minimum level of equity capi- uses the financial and economic cri- only short-term debt to the bank. tal that is dependent not just on its own ses that erupted in August of 2007 as a Financial crises occur when the econ- asset portfolio risk and short-term debt but laboratory for theoretical and empiri- omy is hit by shocks that lead the financier also on “systemic risk” — that depends on cal analysis of those forces. In the past, to exercise the option not to roll over the the aggregate component of asset risk and I focused on market failures, which can short-term debt because the bank is under- the level of system-wide short-term debt.3 arise due to externalities (“neighbor- capitalized — that is, because bank-owners Policies of this type would link regula- hood” or “spillover” effects) from the have little equity capital left as “skin-in-the- tions to macro-prudential concerns that are distress of financial firms, and regulatory game” to continue lending prudently. If related to financial crises and externalities, failures, which can arise due to time- shocks are idiosyncratic to a bank, then the rather than (or not just) micro-prudential inconsistency problems, cognitive cap- under-capitalized banks can be acquired, concerns related to the health of individual ture, or capture that is rooted in political or their activities re-intermediated, by bet- financial institutions. economy problems. This article summa- ter-capitalized banks. If shocks instead are In modern financial systems, much rizes my research on these two failures aggregate in nature, and the entire banking leverage is “embedded” in derivative con- and their interactions. In the conclu- sector is heavily short-term financed, then tracts rather than associated with tradi- sion, I mention my ongoing work on banks suffer a coincident loss of capital, tional short-term debt. A related but sub- government failures, which can arise due and efficient re-intermediation cannot take tler externality arises in the context of to myopia of decision-making in fiscal place. There may be disorderly liquidations derivatives. When an insurer sells protec- and debt policy, and in policy designed or allocation inefficiency. This induces tion against a risk to a number of counter- to bail out a distressed financial sector. financiers to not roll over the short-term parties, each party’s position potentially debt, and a “crisis” materializes.1 Indeed, affects the payoff on the other parties’ Market Failure I: Short-term absent a sufficient pool of long-term capital positions, in a state of the world where Debt, Default, and Externalities in the economy, even relatively small aggre- the insurer lacks capital to honor its con- gate shocks and inefficiencies perceived tractual promises. To reflect this counter- Financial firms that lend to house- by financiers can lead to complete short- party risk externality suitably in the price holds and corporations (both banks and term debt “freezes.”2 Interestingly, losses to of insurance, market participants need to “shadow banks” that perform similar financiers are less likely in good economic know more than the bilateral positions; economic functions) have always fea- times when the likelihood attached to they need to know “what else is being tured short-term debt in their fund- aggregate shocks is small, leading to greater done.” When risks being hedged are aggre- ing structures. The underlying economic short-term leverage for the financial sector gate in nature, private derivative contract rationale for this can be understood by as a whole – including the entry of under- terms in general will not internalize the * Acharya is a Research Associate in the capitalized institutions. Therefore, some- counterparty risk externality, unless terms NBER’s Program on Corporate Finance what counter-intuitively, crises can be more can be contracted upon the aggregate posi- and the C.V. Starr Professor of Economics at severe if an adverse aggregate shock materi- tions of the insurer. This suggests a poten- NYU’s Stern School of Business. His profile alizes in good times than in bad times. tial role for creating transparency in deriv- appears later in this issue. This market failure arises because of atives markets, or requiring centralized

NBER Reporter • 2013 Number 1 5 clearing of relatively large over-the-coun- The importance of this regulatory policy ence in this market.6 In effect, while the ter (OTC) derivatives markets, as part of can be seen by examining the international commercial banking sector looked well- macro-prudential regulation.4 data: they show that countries such as the capitalized on the regulatory capital front United States, the United Kingdom, and during 2003–7, it had in fact built up sig- Regulatory Failures: Micro-­ Germany, which adopted lax capital treat- nificant short-term debt in shadow banks prudential Capital and Liquidity ment of ABCP vehicles, had significant without an economic transfer of risks. Rules presence of their commercial banking sec- This short-term debt experienced rollover tors in the ABCP market, whereas their problems beginning on August 8, 2007, Financial crises engulfed the Western counterparts in Spain and Portugal, which precipitating the crisis (see Figure 1). economies beginning in 2007, and most adopted more prudent capital treatment Second, as the rollover problems of prominently affected the United States of ABCP vehicles, had virtually no pres- short-term debt persisted, given the lack during 2007–8. In the period leading up to the crisis, banks and related financial Panel A: ABCP outstanding firms had extensive short-term debt and common exposure to residential mort- gage assets. When an aggregate shock materialized by end of 2006, in the form of a secular housing price decline in the United States, short-term debt roll- overs became increasingly difficult. There weren’t adequate pools of capital to move mortgage assets off the balance-sheets of the financial sector and, eventually, short- term debt markets froze for many finan- cial firms, leading to en masse failures in the fall of 2008. At a high level, these facts fit the the- oretical narrative of financial crises pre- sented above. It is interesting to note, though, that there was elaborate regula- tory apparatus in place both before and Panel B: Overnight ABCP spread during the crisis, in particular in the form of Basel capital requirements. It is thus useful to understand why the financial sector’s health eroded so rapidly follow- ing the housing price shock. Three exam- ples of regulatory failures stand out from my work addressing the exposure of the financial sector as a whole to short-term debt and aggregate risk. First, the financial crisis erupted in the form of rollover problems for short- term asset-backed commercial paper (ABCP) issued by special purpose vehi- cles (called “conduits” and structured investment vehicles, or SIVs). Many of these vehicles were sponsored by commer- cial banks and effectively guaranteed by them. These guarantees implied that the Figure 1 — Asset-backed commercial paper (ABCP) outstanding and spreads perceived risk transfer from special pur- Panel A plots total ABCP outstanding in the U.S. market from January 2001 to April 2010. pose vehicles was, in effect, non-existent. Panel B shows the spread of overnight ABCP over the federal funds rate from January 2007 Adequate treatment for sponsoring such to August 2008. The figures are based on weekly data published by the Federal Reserve Board. conduits with guarantees was, however, Source: Acharya, Schnabl and Suarez (2013), see endnote 5. absent in regulatory capital requirements.5

6 NBER Reporter • 2013 Number 1 of housing market recovery during 2007– AIG FP’s regulators, allowing the build- ure, they succeeded in doing so by luring 8, banks and shadow banks sustained up of its significant derivatives book in an insured deposits even as their uninsured severe losses. The market value of their unchecked manner.8 deposit base shrunk. Focusing jointly on equity collapsed. A macro-prudential or Why did these “regulatory fail- deposit flows and rates helps us under- system-wide approach to capital require- ures” arise? While potential explanations stand that rather than banks being pas- ment of the financial sector necessitated abound, a leading candidate is that regu- sive liquidity backstops or preferred “safe a prompt response at the early stage of lation was focused on ensuring the safety havens” for investors in a crisis, banks are the crisis in order to get banks to reduce and soundness of individual financial in fact active seekers of funding liquid- their reliance on short-term debt by issu- institutions. The rules and tools were in ity. Importantly, the fact that banks in ing equity capital to redeem the debt many cases inappropriate for assessing the trouble sought funding at aggressive rates that was coming due. And, further ero- buildup of aggregate risk of assets and of imposed a deposit-rate externality on the sion of equity capital through payouts to rollover risk from short-term debt of the funding costs other banks.9 employees and shareholders would have financial sector. Second, the effect of aggregate risk made the financial sector even more frag- on bank intermediation activity is not ile. Nevertheless, not only did the dis- Market Failures II: Transmission limited to spot or term lending as is the tressed financial firms not reduce reli- from Distressed Financial Firms focus of current literature. Banks pro- ance on short-term debt, but they in fact to the Economy vide liquidity insurance in the form of paid out significant dividends — in some lines of credit to corporations, enabling cases, increasing the payouts — in spite The market failures arising from fail- corporations to free up cash holdings of mounting losses.7 Throughout this ures of large banks, or of banking systems for profitable investments. As aggregate period, banks were deemed to be well- at large, have received substantial atten- risk rises, the ability of the banking sec- capitalized by (micro-prudential) regula- tion in the literature. The focus is typi- tor to smooth fees across firms and to tory capital standards. This contributed cally on the contraction of lending from honor the lines of credit declines, limit- to the lack of any significant regulatory banks to small and medium-sized enter- ing the extent of liquidity insurance pro- action for addressing the worsening roll- prises — information-sensitive borrow- vided to corporations (fewer initiations over risk of banks. In the end, this led to ers — and thus bank lending to those not of lines of credit, as well as higher fees, failure or near-failure of most of the larg- easily re-intermediated by other lenders. smaller amounts, and shorter maturi- est financial firms in the United States My recent empirical work, exploiting as a ties on initiations.) This, in turn, induces and Western Europe, captured saliently “laboratory” the period immediately fol- greater cash holdings and lower invest- by Lehman Brothers filing for bankruptcy lowing August 2007 when banks faced ment, even by relatively large corpora- on September 15, 2008. rollover risk in the ABCP market, shows tions of the economy.10 Third, markets as well as regulators that effects of such failures are more far- Third, these effects were not limited were caught off-guard by the case of AIG reaching and multi-faceted than has been to banks in the United States. Foreign Financial Products, which had over $500 traditionally documented. banks provide a significant proportion billion in notional outstanding insurance First, unlike the market stress epi- of intermediation in the form of lines of (“credit protection”) sold to counterpar- sodes of the prior decade (notably the credit in the United States. While the U.S. ties which were themselves large banks 1998 episode surrounding the near-col- banks struggled for deposit funding too, as and financial firms. AIG FP was essen- lapse of Long Term Capital Management), explained above, their funding was eased tially deemed to be safe based on its cur- the banking sector in the 2007–8 cri- in part by the provision of public funding rent rating, but in effect it had significant sis did not experience an immediate net (starting in the fall of 2007) by the Federal leverage conditional on a future down- inflow of deposits. From early 2007 until Reserve and Federal Home Loan Banks. grade, and especially so if such downgrade the government bailout package was put In contrast, many foreign banks without coincided with system-wide stress: such in place, depositors appeared concerned a depository base in the United States stress would lead to recognition of losses about the banking sector’s health and lacked access to public funding and faced in market prices of its assets and a demand moved to prime money-market funds “dollar shortages” — that is, rollover risk for immediate collateral by its counterpar- which invested only in government securi- in dollars. As a result, the terms on lines ties. The public disclosures provided by ties. Indeed, several banks with significant of credit provided by foreign (European) AIG FP show that the rollover risk it faced exposure to ABCP vehicles and undrawn banks to U.S. corporations relative to for- was never stated with adequate granular- lines of credit experienced significant eign borrowers worsened until December ity with respect to significant downgrades, rollover risk in the form of withdraw- 2007 (when dollar swap lines were put in nor did it take account of the underlying als of uninsured deposits. These banks place by the Federal Reserve for foreign aggregate risk exposure of the insurance it responded by offering higher deposit central banks), relative to such a differen- had sold to counterparties. Such disclosure rates in order to maintain their deposit tial effect in terms of lines of credit pro- or transparency was also not required by base; up until a month before their fail- vided by U.S. banks.11

NBER Reporter • 2013 Number 1 7 Fourth, inter-bank markets were sig- the regular incidence of crises in modern 66, (2011), pp.99–138. nificantly impaired because of the pre- financial systems and their adverse conse- 2 Such rollover risk and short-term debt cautionary demand for liquidity of banks quences. Financial crises in the Western freeze is modeled in V. V. Acharya, D. exposed to rollover risks. Using data from economies that started in 2007 bear tes- Gale, and T. Yorulmazer, “Rollover Risk the United Kingdom, where large set- timony to the usefulness of this existing and Market Freezes,” NBER Working tlement banks indicate to the Bank of paradigm. Indeed, the paradigm appears Paper No. 15674, January 2010, pub- England each month their desired liquid- to be a good starting point for thinking lished in the Journal of Finance, 66, ity in the form of requested reserves, it about the role of macro-prudential regu- (2011), pp.1175–1207. can be seen that (exposed) banks raised lation, which considers the financial sys- 3 An implementable tax calculation their liquidity demands (more) follow- tem at large, as well as micro-prudential based on systemic risk assessment of the ing the ABCP freeze in August 2007 and regulation that is narrowly focused on the financial sector can be found in V. V. the failure of Bear Stearns in March 2008. health of individual financial firms. Acharya, L. H. Pedersen, T. Philippon, This liquidity demand was coincident My current research explores a third and M. Richardson, “How to Calculate with a rise in spreads charged in the inter- failure, government failure, which arises Systemic Risk Surcharges,” published bank market, over and above the Bank of because of myopic decision making in in Quantifying Systemic Risk, J. G. England policy rate, in both secured and fiscal policy as well as policy aimed at Haubrich and A.W. Lo, eds. Chicago, IL: unsecured markets. Furthermore, using bailing out a distressed financial sector. University of Chicago Press, 2012. data on bilateral inter-bank transactions, These government failures have the dra- 4 Counterparty risk externality arising this rise in spreads can be attributed to matic implication that financial sector in opaque over-the-counter derivatives the funding problems faced by lending and sovereign credit risks are intimately markets is formalized in V. V. Acharya and banks rather than to the condition of bor- tied. Bank failures can trigger sovereign A. Bisin, “Counterparty Risk Externality: rowing banks. This suggests that the inter- credit risk if bailouts lead the sovereign to Centralized versus Over-the-counter bank market stress during 2007–8 was at sacrifice its creditworthiness; conversely, Markets,” NBER Working Paper No. least in part attributable to precautionary deterioration of sovereign credit risk can 17000, April 2011. hoarding of liquidity by a significant part impose “collateral damage” on the finan- 5 Description of the ABCP conduits, their of the banking sector that faced rollover cial sector directly through its holdings of guarantees from commercial banks, and risk, and not just to an increase in the government bonds and indirectly through their eventual “runs,” can be found in V. counterparty risk of borrowers.12 the implicit government guarantees of the V. Acharya, P. Schnabl, and G. Suarez, Finally, besides the precautionary financial sector.14 Perversely, this bank- “Securitization without Risk Transfer,” demand for liquidity by banks facing roll- sovereign two-way feedback may in fact NBER Working Paper No. 15730, over risk, relatively healthier banks can be preferred by myopic governments that February 2010, published in the Journal have strategic demand for liquidity for are reluctant to cut back on populist of Financial Economics, 107, (2013), pp. acquiring troubled banks, especially as spending: entanglement of the financial 515–36. the crisis gets deeper and bank failures sector with the sovereign is perceived by 6 V. V. Acharya and P. Schnabl, “Do become imminent. This can lead to - fur investors as a sign that the sovereign will Global Banks Spread Global Imbalances? ther reduction in liquidity that is avail- find it too costly to default, boosting the The Case of Asset-Backed Commercial able in the aggregate for funding the sovereign’s ex-ante ability to raise debt and Paper During the Financial Crisis of financial system, households, and cor- spend, but resulting in a worse sovereign 2007–09,” NBER Working Paper No. porations. Evidence suggests that such and financial crisis ex post.15 Integrating 16079, June 2010, published in IMF a motive for holding cash took hold, governments and public policy into the Economic Review, 58, (2010), pp.37–73. especially around the failure of Lehman existing models of banking crises remains 7 V. V. Acharya, I. Gujral, N. Kulkarni, Brothers in September 2008.13 an important topic for further work, as and H. S. Shin, “Dividends and Bank suggested by the ongoing banking and Capital in the Financial Crisis of 2007– Conclusion sovereign crises in the Eurozone. 09,” NBER Working Paper No. 16896, March 2011. To summarize, existing theories and 8 See a discussion of current disclosure evidence on banking crises based on mar- 1 For a formal model capturing both practices of large financial institutions ket failures (namely, the reliance of finan- the private desirability of short-term debt with regard to derivatives-linked collateral cial firms on short-term debt and the and how it can lead to aggregate crises or margin liabilities, in V. V. Acharya, “A externalities from en masse failures of (especially in times of good fundamentals), Transparency Standard for Derivatives,” financial firms to roll over short-term see V. V. Acharya and S. Viswanathan, NBER Working Paper No. 17558, debt) and regulatory failures (imperfect, “Leverage, Moral Hazard and Liquidity,” November 2011, published in Risk incomplete, and sometimes misguided NBER Working Paper No. 15837, March Topography: Systemic Risk and Macro regulation) help us to understand both 2010, published in the Journal of Finance, Modeling, M.K. Brunnermeier and A.

8 NBER Reporter • 2013 Number 1 Krishnamurthy, eds., forthcoming from the for Liquidity? Evidence from the Asset- December 2009, published in Review of University of Chicago Press. Backed Commercial Paper Freeze of 2007,” Financial Studies, 24(6), (2011), 9 These results are contained in V. V. forthcoming as an NBER Working Paper. pp. 2166–2205. Acharya and N. Mora, “Are Banks Passive 12 V. V. Acharya and O. Merrouche, 14 For theoretical and empirical treat- Liquidity Backstops? Deposit Rates and “Precautionary Hoarding of Liquidity and ment of this bank-sovereign nexus, see V. Flows during the 2007–09 Crisis,” NBER Inter-Bank Markets: Evidence from the V. Acharya , I. Drechsler, and P. Schnabl, Working Paper No. 17838, February Sub-prime Crisis,” NBER Working Paper “A Pyrrhic Victory? Bank Bailouts and 2012. No. 16395, September 2010, published Sovereign Credit Risk,” NBER Working 10 V. V. Acharya, H. Almeida, and M. in Review of Finance,17(1), (2013), Paper No. 17136, June 2011. Campello, “Aggregate Risk and the Choice pp.107–60. 15 V. V. Acharya and R. G. Rajan, between Cash and Lines of Credit,” NBER 13 See theory and empirical evidence for “Sovereign Debt, Government Myopia Working Paper No. 16122, June 2010, strategic demand for cash in a crisis in V. V. and the Financial Sector,” NBER Working forthcoming in the Journal of Finance. Acharya, H. S. Shin, and T. Yorulmazer, Paper No. 17542, October 2011, forth- 11 V. V. Acharya, G. Afonso, and A. “Crisis Resolution and Bank Liquidity,” coming in Review of Financial Studies. Kovner, “How do Global Banks Scramble NBER Working Paper No. 15567,

Immigrant Selection and Assimilation during the Age of Mass Migration

Leah Boustan*

The Age of Mass Migration from Mass migration can inform our views of natives, in the U.S. labor market from Europe to the New World (1850–1913) the past and the present. During this era, 1900 to 1910 to 1920. Assembling this was one of the largest such episodes in the United States maintained an open data has been made possible by the public human history. By 1910, 22 percent of border for European migrants, which release of Census manuscripts 70 or more the U.S. labor force was foreign born, allows us to observe the immigration years after the initial survey. We match compared to “only” 17 percent today. process in the absence of government individuals across Census waves by first In a joint research program with Ran constraints. Furthermore, beliefs about name, last name, age, and place of birth. Abramitzky and Katherine Eriksson, I (the lack of) immigrant assimilation at For all of its advantages, the histori- ask three related questions about this the time have contributed to the forma- cal data also have two limitations. First, large and formative migrant flow: Were tion and passage of the more restrictive match rates across Censuses tend to be migrants who settled in the United States migration policies of today. low, mainly because men with common in the late nineteenth century positively Our project greatly expands our names cannot be uniquely linked; our or negatively selected from the European knowledge of this era by creating and ana- match rates range from 20 to 30 per- population? What was the economic lyzing two large panel datasets of trans- cent, which is standard in this literature.2 return to this migration? And, how did Atlantic migrants from historical Census Despite low match rates, our matched these new migrants fare in the U.S. labor records. Our first dataset links 50,000 sample is roughly representative of the market, both upon first arrival and after men from their birthplace in the 1865 population. Second, we are only able spending some time in the country? Norwegian Census to their adult resi- to collect information about individual A better understanding of the Age of dence in 1900 in either the United States occupations, rather than individual earn- or Norway. We focus on Norway because ings, which the Census first recorded only * Leah Platt Boustan is a Research it is a large sending country and has two in 1940. Our standard approach is then Associate in the NBER’s Programs on the complete digitized historical Censuses to assign individuals the mean earnings Development of the American Economy 1 and Education and an associate professor of (1865 and 1900). Our second dataset in their occupation cell, which we refer to Economics at the University of California, follows 24,000 men, including immi- as “occupation-based earnings.” This mea- Los Angeles. Her profile appears later in grants from 16 European sending coun- sure cannot capture aspects of the return this issue. tries and a comparison group of U.S. to migration and of labor market assimila-

NBER Reporter • 2013 Number 1 9 tion that occurs by attaining higher earn- less likely to own assets, including land, an during this period. In some cases, return ings within occupation cells. owner-occupied home, or a business; and, migrants used a deliberate strategy of conditional on owning some land, have temporary migration to the New World. Economic Return to Migration property of lesser value as proxied by their These temporary migrants will appear property tax bills. A similar pattern holds negatively selected in our data if they A simple measure of the return for both migration to the United States remained in low-paid occupations during to migration contrasts the earnings of and internal migration within Norway. their short sojourn in the United States. migrants to the United States with the Taken together, this evidence suggests Ideally, one could follow the career earnings of men who stayed in Europe. that men with poorer economic prospects trajectories of individual immigrants as This basic approach can be confounded were more likely to migrate in the late they spend time in the United States. Our by migrant selection. For example, if the nineteenth century. panel dataset approximates these ideal brightest people — those who would We further demonstrate that men conditions. Contrary to the existing lit- have earned more regardless of loca- with a higher likelihood of inheriting land erature, we find that the typical immi- tion — were the most likely to move to are less likely to migrate. Inheritance varied grant in the panel did not face a large the United States, then a naïve estimate both by birth order and by the gender com- initial earnings penalty upon first arrival of the return to migration will be biased position of one’s siblings. On Norway’s in the United States and moved up the upward; likewise, the return to migra- western coast and in the far North, two occupational ladder at the same rate as tion will be biased downward in the case areas where primogeniture was particularly the native born. We conclude that the of negative selection. We thus compare strong, oldest sons could expect to inherit large earnings gap and subsequent conver- the earnings of migrants to the earn- the family farm. In these regions, oldest gence observed in a single cross-section is ings of their brother(s) who remained in brothers in households with land were less driven by a combination of declining skill Europe, an approach that eliminates the likely to migrate than were their younger levels across immigrant arrival cohorts, across-household component of migrant brothers. In the rest of the country, house- both between and within countries-of- selection. Such selection will be present hold assets were more likely to be divided origin, and by the departure of negatively- if households that were financially con- between sons. In these regions, men with selected return migrants. strained or that faced poor economic more brothers, as opposed to sisters, from Our study is the first to document the opportunities in Europe experienced dif- households with land were more likely to substantial heterogeneity in the assimi- ferent propensities to migrate. migrate. In both cases, the lower a man’s lation patterns of migrants from differ- We estimate a return to migration expected wealth, the more likely he was ent countries of origin. Immigrants from within brother pairs of around 70 per- to leave his municipality of birth for des- France, Russia, and the English-speaking cent.3 These returns are lower than con- tinations both internal and international. countries of the United Kingdom held temporary estimates for the return to Neither birth order nor gender composi- significantly higher-paid occupations migration from Mexico to the United tion of siblings influence migration among than U.S. natives upon first arrival, while States, as would be expected given the rel- sons in landless households. immigrants from other countries started atively unconstrained supply of migrant out in equivalent or lower-paid occu- labor in this era.4 In addition, our esti- Migrant Assimilation pations. Regardless of starting position, mation method reveals evidence of nega- immigrants from almost every country tive occupational selection for migrants We then turn to the success of these moved up the occupational ladder at the leaving urban areas. In particular, we find newcomers in the U.S. labor market, ask- same rate as natives, rather than progress- that the population estimate of the return ing how immigrants from Norway and ing faster to converge with natives. As a to migration in the urban sample is 20 to 15 other sending countries fared upon result, any initial occupation-based gaps 30 percent lower than the within-brother arrival.6 The consensus from prior stud- between immigrants and natives were pre- estimate, a pattern that we attribute to ies, all of which have been based on cross- served over time. negative selection of migrant households. sectional data, is that these immigrants held substantially lower-paid occupations Broader Conclusions Migrant Selection than natives upon first arrival but expe- rienced rapid convergence with natives Our work on the Age of Mass We provide more direct evidence of over time.7 Yet inferring assimilation from Migration contains three important les- negative selection in this migrant flow a cross section is subject to well-known sons for our understanding of the eco- by comparing the socio-economic sta- biases caused by changes in the skill lev- nomics of immigration. tus of the fathers of migrants and non- els of immigrant arrival cohorts over time Roy model migrants.5 We find that the fathers of and to the potentially selective return migrants in both rural and urban areas migration to source countries.8 Over a The Roy model predicts that migrants have lower occupation-based earnings; are quarter of migrants returned to Europe will be negatively selected if the send-

10 NBER Reporter • 2013 Number 1 ing country has a higher return to skill or tions are not necessary to ensure migrant No. 18298, August 2012, and Journal of more unequal income distribution than assimilation. At the same time, we also Development Economics, forthcoming. the destination.9 Unlike today, Norway note that migrants who arrived with low 6 R. Abramitzky, L. Boustan, and K. was more unequal than the United States skill levels did not manage to close their Eriksson, “A Nation of Immigrants: in the nineteenth century. Therefore, our skill gap with natives over time. This find- Assimilation and Economic Outcomes finding of negative migrant selection from ing undercuts the commonly-held view in the Age of Mass Migration,” NBER Norway to the United States is consistent that, unlike today’s migrants, past waves Working Paper No. 18011, April 2012. with the standard Roy model. of European immigrants, even those who 7 Most recently, see T. Hatton, “The In contrast, most work on contempo- arrived without the ability to read or to Immigrant Assimilation Puzzle in Late rary immigrant flows finds little empirical speak English, were able to quickly catch Nineteenth-Century America,” Journal support for the Roy model.10 One expla- up with natives. of Economic History, 57 (1997), pp. nation for positive migrant selection today 34–62, and C. Minns, “Income, Cohort is that the high cost of migration, includ- Effects and Occupational Mobility: A ing fees for entering the United States ille- 1 U.S. data is taken from the Integrated New Look at Immigration to the United gally, prevents the poor from engaging in Public-Use Microdata Series (IPUMS) States at the Turn of the 20th Century,” migration.11 The cost of migration was and the genealogy website, Ancestry.com. Explorations in Economic History, 37 lower in the past, which may have allowed For similar analyses for migrants from (2000), pp. 326–50. the negative selection predicted by the Great Britain or the U.S. South, see J. 8 G. Borjas, “The Impact of Assimilation Roy model to be manifest. Ferrie and J. Long, “British, American, on the Earnings of Immigrants: A Financial constraints and British-American Social Mobility: Reexamination of the Evidence,” NBER Intergenerational Occupational Change Working Paper No. 1515, February Hanson (2010) and Clemens (2011) Among Migrants and Non-Migrants in 1986, and Journal of Labor Economics, forcefully argue that one of the most the Late 19th Century,” manuscript, 2012, 3 (1985), pp. 463–89 (under the title effective international development poli- and W. Collins and M. Wanamaker, “Assimilation, Changes in Cohort Q uality, cies would be easing national migration “Selection and Earnings Gains in the and the Earnings of Immigrants”), and restrictions in developed countries.12 Yet, Great Migration of African Americans: D. Lubotsky, “Chutes or Ladders? A even if explicit barriers to migration were New Evidence from Linked Census Data,” Longitudinal Analysis of Immigrant lowered, high migration costs and credit manuscript, 2012. Earnings,” Journal of Political Economy, constraints might prevent the world’s 2 An introduction to modern linking 115 (2007), pp. 820–67. poor from moving to rich countries. Our methods can be found in J. Ferrie, “A 9 A. Roy, “Some Thoughts on the finding of negative selection during the New Sample of Americans Linked from Distribution of Earnings,” Oxford Age of Mass Migration suggests that a the 1850 Public Use Micro Sample of the Economic Papers, 3 (1951), pp. 135–46, lack of household (or individual) wealth Federal Census of Population to the1860 and G. Borjas, “Self-Selection and the did not pose a barrier to migration at Federal Census Manuscript Schedule,” Earnings of Immigrants,” NBER Working a time when U.S. borders were open to NBER Historical Working Paper No. 71, Paper No. 2248, issued in1988, and European migrants and migration costs August 1995, and Historical Methods, American Economic Review, 77 (1987), were relatively low. These findings suggest 29 (1996), pp. 141–56. pp. 531–53. that lifting migration restrictions may be 3 R. Abramitzky, L. Boustan, and K. 10 D. Chiquiar and G. Hanson, sufficient to facilitate migration among Eriksson, “Europe’s Tired, Poor, Huddled “International Migration, Self-Selection, the world’s poor. Masses: Self-Selection and Economic and the Distribution of Wages: Evidence Assimilation Outcomes in the Age of Mass Migration,” from Mexico and the United States,” NBER Working Paper No. 15684, NBER Working Paper No. 9242, Contemporaries questioned the abil- January 2010, and American Economic September 2002, and Journal of Political ity of European immigrants to assimilate Review, 102 (2012), pp. 1832–56. Economy, 113 (2005), pp. 239–81; C. into the U.S. economy and called for strict 4 G. Hanson, “Illegal Migration from Feliciano, “Educational Selectivity in migration restrictions that favored coun- Mexico to the United States,” NBER U.S. Immigration: How Do Immigrants tries with highly-skilled residents. Our Working Paper No. 12141, April 2006, Compare to Those Left Behind?” results indicate that these concerns were and Journal of Economic Literature, 44 Demography, 42 (2005), pp. 131–52; unfounded: the average permanent immi- (2006), pp. 869–924. and J. Grogger and G. Hanson, “Income grant in this era arrived with skills simi- 5 R. Abramitzky, L. Boustan, and K. Maximization and the Selection and lar to those of natives and experienced Eriksson, “Have the Poor Always Been Sorting of International Migrants,” NBER identical rates of occupational upgrad- Less Likely to Migrate? Evidence From Working Paper No. 13821, February ing over their lifecycle. These successful Inheritance Practices During the Age of 2008, and Journal of Development outcomes suggest that migration restric- Mass Migration,” NBER Working Paper Economics, 95 (2011), pp. 42–57. For a

NBER Reporter • 2013 Number 1 11 contrary view of the selection of Mexican and Evidence from Mexico,” Journal of NBER Working Paper No. 16470, migrants, see J. Fernández-Huertas Development Economics, 84 (2007), October 2010, and Journal of Economic Moraga, “New Evidence on Emigrant pp. 1–24, and “Self-Selection Patterns Literature, 48(2010), pp. 987-1004, and Selection,” Review of Economics and in Mexico-US Migration: The Role M. Clemens, “Economics and Emigration: Statistics, 93(2011), pp. 72–96. of Migration Networks,” Review of Trillion-Dollar Bills on the Sidewalk?” 11 D. McKenzie and H. Rapoport, Economics and Statistics, 92 (2010), Journal of Economic Perspectives, 25 “Network Effects and the Dynamics pp. 811–21. (2011), pp. 83–106. of Migration and Inequality: Theory 12 G. Hanson, “Why Isn’t Mexico Rich?”

Saving in Developing Countries

Eswar S. Prasad*

The evolution of national savings in in explaining differences in saving lev- mies (plus Turkey) over the period 1960– developing countries (a broad term that I els across countries.2 The fact that Asian 84. She concludes that high growth rates, use here to refer to middle-income emerg- economies traditionally have had higher a low dependency ratio, and high income ing markets, as well as less developed saving rates than developing and indus- levels are all positively associated with low-income economies) has received trialized economies in other regions has saving rates. She argues further that there considerable attention in discussions of received some attention, but there is are structural differences between low- global current account imbalances. In no persuasive explanation for this phe- income and middle-income countries in the run-up to the global financial crisis, nomenon. Economists have had to rely the determinants of savings.4 these imbalances were characterized by on weak non-economic explanations, Charles Horioka and Akiko Terada- large and rising current account deficits such as the argument that Asians are Hagiwara find that domestic saving rates in the United States, United Kingdom, culturally predisposed towards saving. in developing Asia rose during the period and a few other advanced economies, This hypothesis has been formally tested 1966–2007. They conclude that the main matched by corresponding surpluses using data from the U.S. Census to exam- determinants of those trends were the age in many emerging markets and a few ine whether immigrants to the United structure of the population (especially the oil-exporting economies. Rising saving States from high-saving countries tend elderly dependency ratio), income levels, rates in China and many other Asian to save more than immigrants from low- and the level of financial sector develop- economies began to receive increased saving countries. The results show that ment.5 They forecast that over the next attention from researchers around this there are significant differences in immi- two decades the domestic saving rate in period, and Federal Reserve Chairman grants’ saving behavior by country of ori- developing Asia as a whole will remain Ben Bernanke’s 2005 speech arguing that gin, but those differences do not match roughly constant, despite rapid popula- the “savings glut” in emerging markets up with the differences in national sav- tion aging in most of those economies, was a proximate cause of the imbalances ing rates. In particular, immigrants from in part because the negative impact of gave further impetus to that research.1 high-saving Asian countries do not save population aging on the domestic saving Economists have been more success- more than other immigrants.3 rate will be largely offset by the positive ful in explaining changes in saving rates impact of higher income levels. within specific countries over time than Saving in Asia National saving comprises saving by households, corporations, and the gov- * Eswar S. Prasad is a Research Associate Given their high and rising saving ernment. Household savings typically in the NBER’s International Finance and Macroeconomics Program and the rates, Asian economies have been the has attracted most of the attention of Tolani Senior Professor of Trade Policy subject of considerable research. In an researchers because it is more amenable to and Professor at Economics at Cornell early contribution focusing on the region, theoretical modeling than the other com- University. His profile appears later in this Susan Collins looks at rising national sav- ponents of nations saving, and because issue. ing rates in nine Asian developing econo- its determinants can be analyzed using

12 NBER Reporter • 2013 Number 1 household-level survey data. Corporate tern in recent years, with younger and over space are the lagged saving rate, the saving (retained earnings) has received older households having relatively high income growth rate, (in many cases) the less attention, but in fact has been the key saving rates. We argue that these pat- real interest rate, and (in some cases) the driver behind the surge in national savings terns are best explained by the rising pri- inflation rate. They find little evidence in major Asian emerging markets during vate burden of expenditures on hous- that variables relating to the age struc- the latter half of the last decade.6 ing, education, and health care. These ture of the population have the expected While household saving rates have effects and precautionary motives may impact on the household saving rate. also trended up in most major Asian have been amplified by financial under- Their results provide mixed support for economies, one prominent Asian econ- development, as reflected in constraints the life-cycle hypothesis and the perma- omy where the household saving rate has on borrowing against future income and nent income hypothesis, and are consis- fallen quite significantly over the last two low returns on financial assets. tent with the existence of inertia or persis- decades is Korea. Young Jun Chun evalu- In subsequent work, Chamon, Kai tence in household saving behavior. ates the effects of population aging and fis- Liu, and I examine the role of pre- Other research on China has empha- cal policies on national saving in Korea.7 cautionary saving motives in explaining sized demographic factors as one of the Using a life-cycle model that incorpo- both the increase in China’s household main determinants of the rising house- rates a generational accounting approach, saving rate since the mid-1990s and the hold saving rate. Chadwick Curtis, Steven he argues that rapid population aging interesting fact that the age-savings pro- Lugauer, and Nelson Mark undertake a and the long-term budgetary imbalance file has become U-shaped during the quantitative investigation using an over- have and will continue to drive down the 2000s.10 We find that, in addition to the lapping-generations model.12 In their national saving rate in Korea. factors identified in our earlier research, model, dependent children’s utility enters rising income uncertainty and pension into parents’ utility so that parents choose China reforms help to explain both of these the consumption level of the young until phenomena. Using a panel of Chinese they leave the household. Working agents The sheer scale of China’s saving, households covering the period 1989– give a portion of their labor income to which now exceeds 50 percent of GDP, 2006, we document that strong aver- their retired parents and save for their has drawn considerable research atten- age income growth has been accompa- own retirement, while the aged live on tion. Dennis Yang, Junsen Zhang, and nied by a substantial increase in income their accumulated assets and on support Shaojie Zhou look at determinants of all uncertainty. Interestingly, the perma- from their children. These researchers three components of saving in China and nent variance of household income take future demographic changes, labor conclude that economic, demographic, remains stable while it is the transitory income, and interest rates as exogenously and policy trends in the internal and variance that rises sharply. A calibration given. They argue that their calibrated external environments of the Chinese of a buffer-stock savings model indicates model accounts for much of observed economy are likely to lead to a decline in that rising savings rates among younger increase in the household saving rate from national saving in the foreseeable future.8 households are consistent with rising 1963 to 2009. With greater access to household- income uncertainty and that higher sav- While evidence of conventional level datasets, there has been an intense ing rates among older households are demographic factors, such as an aging pop- focus on explaining the rise in China’s consistent with a decline in the pension ulation, in driving household saving rates household saving rate. From 1995 to replacement ratio for those retiring after has been mixed, there are other aspects 2005, the average urban household sav- 1997. We conclude that rising income of changing demographics in China that ing rate in China rose steadily by 7 per- uncertainty and pension reforms can have been the subject of research as well. centage points, to about one quarter of explain more than half of the increase Shan-Jin Wei and Xiaobo Zhang pro- disposable income. The urban saving rate in the urban household savings rate in pose a novel and unorthodox explana- has continued to rise since then, driv- China since the mid-1990s, as well as tion based on competitive saving result- ing the national household saving rate the U-shaped age-saving profile. ing from unbalanced sex ratios (tilted in higher as well. Marcos Chamon and I Other researchers have used less dis- favor of males) in China.13 As the sex use data from China’s Urban Household aggregated data to provide complemen- ratio rises, Chinese parents with a son Surveys to explain why households are tary perspectives on household saving raise their savings in a competitive man- postponing consumption despite rapid behavior. Horioka and Junmin Wan con- ner in order to improve their son’s relative income growth. 9 Tracing cohorts over duct a dynamic panel analysis of the deter- attractiveness for marriage. The pressure time indicates a virtual absence of con- minants of the household saving rate in on savings spills over to other households. sumption smoothing over the life cycle. China using a life-cycle model and panel Both cross-regional and household-level Saving rates have increased across all data on Chinese provinces for the period evidence supports this hypothesis. They demographic groups, although the age 1995–2004.11 They find that the main conclude that this motive potentially profile of savings has an unusual pat- determinants of variations over time and can account for about half of the actual

NBER Reporter • 2013 Number 1 13 increase in the household savings rate dur- between Chinese majority state-owned Behavior? Evidence from Immigrants,” ing 1990–2007. and private listed firms. Other evidence NBER Working Paper No. 6568, May Abhijit Banerjee, Xin Meng, and reported by Loukas Karabarbounis and 1998, and Economic Development and Nancy Qian exploit the changes in Brent Neiman suggests that China is not Cultural Change, Vol. 48, no. 1 (1999), China’s demographics caused by its special and that declining labor shares pp. 33–50. family planning policies to study the and the rise of corporate saving are global 4 S.M. Collins, “Saving Behavior in effects of changes in the demographic phenomena.17 One factor behind these Ten Developing Countries,” in National structure on savings and wealth.14 They phenomena is the global decline in the Saving and Economic Performance, B. D. find that children provide a substantial cost of capital beginning in the 1980s, Bernheim and J. B. Shoven, eds., January amount of support for elderly parents which has led firms around the world to 1991, pp. 349–76. Also see S. Edwards, and that sons provide more support than shift away from labor and towards capi- “Why are Saving Rates So Different daughters. Their empirical estimates tal, financed in part with an increase in Across Countries? An International support the predictions of a simple corporate saving. Comparative Analysis,” NBER Working life-cycle model, based on which they Paper No. 5097, April 1995, and Journal conclude that the exogenous reduction More Work Ahead of Development Economics, Vol. 51, no. in fertility because of family planning 1(October 1996), pp. 5–44. policy caused a significant increase in With developing economies play­ 5 C.Y. Horioka and A. Terada-Hagiwara, household savings, and that all of the ing an increasingly important role in “The Determinants and Long-term increase is driven by parents who have a the global economy, there is growing Projections of Saving Rates in Developing daughter as their only child. interest in explaining saving behavior in Asia,” NBER Working Paper No. 17581, these economies from both micro and November 2011, and in Japan and the Corporate Savings macro perspectives. Increase in access World Economy, Vol. 24, no. 2 (March to household and firm-level datasets in 2012), pp. 128–37. As in other Asian economies, corpo- China and other developing economies 6 See E.S. Prasad, “Rebalancing Growth rate saving was a principal driver of the has set off an exciting research program, in Asia,” NBER Working Paper No. rising national saving rate in China.15 although a number of questions have 15169, July 2009, and International During 2003–7, the share of household not yet been conclusively answered. For Finance, Vol. 14, Issue 1, pp. 27–66, saving in GDP actually declined, even instance, the micro evidence suggests a Spring 2011. though the household saving rate (saving range of plausible explanations for the rise 7 Y. J. Chun, “Population Aging, Fiscal as a share of disposable income) contin- in China’s household saving rate, although Policies, and National Saving: Predictions ued to rise. This apparent anomaly is the there is no easy way to distinguish for Korean Economy,” NBER Working consequence of a greater share of national among these different hypotheses in a Paper No. 12265, May 2006. income going to capital than to labor. If unified framework. Integrating the micro 8 D.T. Yang, J. Zhang, and S. Zhou, households effectively own the firms in and macro perspectives to explain the “Why Are Saving Rates so High an economy, either directly or indirectly, determinants of saving-investment in China?,” NBER Working Paper this should not matter because firms’ balances in these countries is likely to No. 16771, February 2011, and in profits will increase household disposable remain a fertile area of research. Capitalizing China, J. Fan and R. Morck, income. However, in China, a majority eds., forthcoming from the University of of firms are still state-owned and most of Chicago Press. them don’t pay dividends to the state. 1 B. Bernanke, “The Global Saving Glut 9 M. Chamon and E.S. Prasad, “Why China’s high corporate saving rate and the U.S. Current Account Deficit,” Are Saving Rates of Urban Households in has received attention in policy circles, Sandridge Lecture, Virginia Association China Rising?” NBER Working Paper No. but has been the subject of only limited of Economists, Richmond, VA, March 10, 14546, December 2008, and American research so far. Tamim Bayoumi, Hui 2005. Economic Journal: Macroeconomics, Tong, and Wei examine firm-level data 2 See S. Edwards, “Why are Saving January 2010, Vol. 2(1), pp.93–130. and conclude that it indicates a global Rates so Different Across Countries? An 10 M. Chamon, K. Liu, and E.S. Prasad, trend of rising corporate saving over the International Comparative Analysis,” “Income Uncertainty and Household period 2002–7.16 Chinese state-owned NBER Working Paper No. 5097, April Savings in China,” NBER Working Paper firms only recently were required to pay 1995, and Journal of Development No. 16565, December 2010. out dividends to the state, and these pay- Economics, Vol. 51, no. 1(October 1996), 11 C.Y. Horioka and J. Wan, “The ments are still quite low relative to prof- pp. 5–44. That paper also has a good sur- Determinants of Household Saving in its. However, these authors conclude that vey of the literature that preceded it. China: A Dynamic Panel Analysis of there is no significant difference in the 3 C.D. Carroll, B. Rhee, and C. Rhee, Provincial Data,” NBER Working Paper savings behavior and dividend patterns “Does Cultural Origin Affect Saving No. 12723, December 2006, and Journal

14 NBER Reporter • 2013 Number 1 of Money, Credit and Banking, Vol. 39, Rates in China,” NBER Working Paper “The Chinese Corporate Savings Puzzle: no. 8 (December 2007), pp. 2077–96. No. 15093, June 2009, and Journal of A Firm-level Cross-Country Perspective,” 12 C.C. Curtis, S. Lugauer, and N.C. Political Economy, June 2011. NBER Working Paper No. 16432, Mark, “Demographic Patterns and 14 A. Banerjee, X. Meng, and N. Q ian, October 2010. Household Saving in China,” NBER “The Life Cycle Model and Household 17 L. Karabarbounis and B. Neiman, Working Paper No. 16828, February Savings: Micro Evidence from Urban “Declining Labor Shares and the Global 2011. China,” forthcoming as an NBER Working Rise of Corporate Saving,” NBER Working 13 S. Wei and X. Zhang, “The Paper. Paper No. 18154, June 2012. Competitive Saving Motive: Evidence 15 E.S. Prasad, 2011 (op. cit. endnote 7) from Rising Sex Ratios and Savings 16 T. Bayoumi, H. Tong, and S. Wei,

The Effect of Climate Change and Biofuel Mandates on Agricultural Output and Food Prices

Wolfram Schlenker*

The four staple commodities — consumer surplus from the four basic 33°C for cotton — above that, further maize, soybeans, rice, and wheat — commodities by approximately 1.25 temperature increases become harmful. account for roughly 75 percent of the trillion dollars annually. While various The relationship above the threshold is world’s caloric consumption, either causes have been mentioned as possible again linear, but the slope of the decline directly as food or indirectly in the form driving forces behind the recent price above the optimum is an order of magni- of feedstock for animals. The U.S. share increase, my past research has focused on tude steeper than the incline below it: that of global caloric production in those four two of them: the effects of weather on is, being 1 degree above the optimum for commodities is 23 percent, about three agricultural yields and the effect of bio- ten days has the same effect as being 10 times Saudi Arabia’s market share in oil fuel mandates on food prices. degrees above the optimum for one day. production. Of particular importance is Both decrease annual maize yields by 6 U.S. maize (sometimes also called corn), The Effects of Weather/Climate percent. Note, however, that we are incor- the country’s largest crop, accounting on Yields porating the entire temperature distribu- for 10 percent of global caloric produc- tion within a day, and the largest fraction tion. Given its market share, any policy Agricultural production, except for of a day is usually below the threshold. It or shock that affects U.S. maize pro- some specialty crops that are grown in takes several days with a maximum above duction has worldwide ramifications for greenhouses, depends directly on weather. the threshold to obtain a 24-hour expo- commodity prices, which move together Because weather is predicted to change sure period above the threshold. because they are close substitutes. over the next century, one natural ques- Most U.S. counties are expected to While agriculture constitutes a small tion is how that will affect agricultural suffer yield declines under climate change. fraction of U.S. GDP, it is responsible for production and prices. The predicted increase in the frequency a large part of consumer surplus because a) Extreme heat and crop yields of temperatures above the threshold agricultural demand is highly inelas- accounts for the largest share of the esti- tic. The tripling of commodity prices Michael Roberts and I linked a county- mated effect on yield, and trumpets the between 2005 and 2008 reduced global level panel of corn and soybean yield, the effect of temperature changes below the two largest crops in the United States, as threshold, as well as precipitation changes. * Schlenker is a Research Associate in the well as cotton, a warm weather-crop, to Adaptation to extreme heat seems dif- NBER’s Program on Environmental a fine-scale dataset of weather outcomes ficult or prohibitively costly. We obtain the and Energy Economics and an Associate that explain the distribution of tempera- same statistical sensitivity to extreme heat Professor of Agricultural and Resource 1 Economics at the University of California, tures within each day. Yields increase lin- whether we look at the panel, a pure time- Berkeley. His profile appears later in this early in temperatures up to 29°C (84°C) series linking annual overall U.S. yields to issue. for corn, 30°C (86°F) for soybeans, and weather, or a cross-section linking aver-

NBER Reporter • 2013 Number 1 15 age yields in a county to average weather riorate again once growers switched from a placebo when we repeatedly estimate outcomes (climate in a location). In other double-crossed hybrid corn to single- trends for random draws from a station- words, the difference in average produc- crossed hybrid corn in the 1960s. Going ary time-series of the same length. The pic- tivity explained by differences in climate forward, the predicted increases in tem- ture changes dramatically for 1980-2008: shows the same sensitivity as the sensitiv- perature would result in significant yield observed temperature trends are gener- ity of yields in a given place to year-to-year losses using today’s corn varieties. ally positive and are shifted to the right of weather fluctuations. It would seem that c) The 2012 U.S. heat wave the placebo: most parts of the world have farmers who repeatedly face higher tem- experienced warming trends that cannot peratures should have more of an incen- Some breeding companies have be attributed to statistical noise. One tive to adapt to these high temperatures claimed that the latest corn varieties have notable exception is the United States. than farmers who face a one-time weather improved heat and drought tolerance. In a second step, we estimate a panel shock, yet the effects are the same empiri- The year 2012, which had the second- linking yields to observed weather out- cally. In a different study, Anthony Fisher, largest exposure to temperatures above comes. We compare predicted yields Michael Hanemann, and I find a com- 29°C since 1950 and was the second under the observed weather outcomes to parable sensitivity to extreme heat in the driest year, offers a test of how well the a counterfactual where we subtract the cross-section of U.S. farmland values, new crop varieties can handle heat and observed trends. Global caloric produc- which includes as an adaptation strategy drought. One unique feature of 2012 was tion is predicted to have been 3 percent switching between crops.2 that the heat wave was concentrated in less than what it would have been with- The crucial importance of extreme the month of July. Steven Berry, Roberts, out the observed climate trends, which heat is also consistent with underlying and I estimate a new county-level panel implies a roughly 20 percent increase in agronomic models of crop growth: high that allows the effect of extreme tem- commodity prices. The next section out- temperatures decrease the water supply peratures to evolve over the growing sea- lines how we translate quantity changes (through evaporation or plant transpira- son. 5 Corn is most sensitive to hot tem- into price changes. tion) and at the same time increase the peratures around a third of the way into water demand to sustain a given level of the growing season, which coincides with U.S. Policies and the carbon uptake, affecting both the supply flowering. Since the 2012 heat wave hit Effect of Food Prices and the demand for water. On the other the most productive corn growing area in hand, precipitation only affects the water the United States during the time when it a) Biofuel policies supply. My co-authors and I use the agro- was most vulnerable, a model that allows nomic crop model APSIM to examine the the effect of extreme heat to vary over The 2009 U.S. Renewable Fuel stan- exact mechanism. 3 APSIM suggests that the growing season yields larger damages dard diverted a third of U.S. maize pro- extreme temperatures do not affect the than a standard model that assumes the duction into ethanol. Given the U.S. share plant itself through heat stress, but rather effect to be homogenous across the entire of global maize production, this trans- through increased vapor pressure deficit season. More importantly, though, pre- lates into 5 percent of combined caloric (water stress). The sensitivity to extreme dicted yield declines under both the stan- production of the four staple commodi- heat in APSIM is comparable to statistical dard and the revised model are less severe ties. By comparison, global production studies of observed crop yields. than the preliminary yield forecasts for shocks (deviations from a trend) ranged b) Evolution of heat sensitivity over time 2012, suggesting that the statistical model from -5.7 percent to +4.4 percent in does not exaggerate the damaging effects 1961–2010 as country and crop-specific We find no evidence for adaptation of extreme heat as recent as 2012. Going weather shocks averaged out. The U.S. in hotter places, but one might won- forward, climate models suggest that the ethanol mandate diverts as many calories der whether there has been progress in 2012 temperature outcomes will be a from the world market every year as the heat tolerance over time. Average yields below-average year by mid-century as the worst observed supply shock in the last have tripled between 1950 and 2005, temperature distribution shifts upward. fifty years. Given the size of this market yet Roberts and I find that sensitivity d) Observed climate trends intervention, it can be expected to signifi- to extreme heat is among the highest cantly affect global commodity prices. around 2005 and again roughly com- The last three decades have seen The size of the price increase depends parable in hot and cold climates (which increasing temperatures in many parts of on the demand and supply elasticities had very different incentives to adapt to the world. David Lobell, Justin Costa- for staple commodities. Roberts and I extreme heat events).4 In a longer time- Roberts, and I estimate country and crop- develop a novel framework for identify- series for Indiana that starts in 1901, we specific temperature and precipitation ing the elasticities of storable commodi- find some improvement in heat tolerance trends for 1960–80 for the four major sta- ties.7 Concurrent supply shocks have been after hybrid corn was introduced in the ple commodities.6 We find that the distri- used as exogenous shifters since P. G. 1930s, but heat tolerance started to dete- bution of trends is indistinguishable from Wright invented instrumental variables.

16 NBER Reporter • 2013 Number 1 Following a similar logic, to identify a pollution surface over the Eastern United Conditions,” Review of Economics and supply response we can use past shocks, States and use it as an explanatory variable Statistics, 88(1) (2006): pp.113–25. which affect inventory levels that link in a panel of U.S. maize yields, while also 3 D.B. Lobell, G. L. Hammer, G. production and price levels between peri- accounting for weather and other pollu- McLean, C. Messina, M. J. Roberts, ods, as an instrument for futures prices in tion variables. We find a critical thresh- and W. Schlenker, “Understanding the the next period. old of 72ppb in hourly ozone readings. Critical Role of Extreme Heat for Maize We find a supply elasticity of 0.11 that Pollution fluctuations below the thresh- Production in the United States,” Nature is roughly twice the absolute magnitude old have no significant effect on annual Climate Change, forthcoming. of the demand elasticity of -0.055. The maize yields, but yields decrease linearly 4 M. J. Roberts and W. Schlenker, “Is equilibrium price of calories is predicted in hourly ozone levels above 72ppb. The Agricultural Production Becoming More or to increase by 30 percent because of the current U.S. ambient standard is set at Less Sensitive to Extreme Heat? Evidence outward shift in the demand for calories 75ppb, which is fairly close to our esti- from U.S. Corn and Soybean Yields” to meet the ethanol mandate. Two-thirds mated threshold, but the U.S. standard is NBER Working Paper No. 16308, August of the calories required to meet the etha- based on the highest consecutive 8hr aver- 2010. nol mandate will come from new supply, age in a day, which can hide hourly spikes. 5 S. T. Berry, M. J. Roberts, and W. while one-third will come from reduc- Hourly ozone levels above 72ppb have Schlenker, “Corn Production Shocks in tions in the demand for calories, which been declining steadily between 1993 and 2012 and Beyond: Implications for Food correspond to the caloric equivalent of 2011 and are currently close to zero, sug- Price Volatility,” NBER Working Paper feeding 132 million people for one year gesting that further pollution reduction No. 18659, December 2012. on a 2000 calorie/day diet. In case one will no longer boost maize yields. 6 D. B. Lobell, W. Schlenker, and J. third of the calories used in ethanol pro- Costa-Roberts, “Climate Trends and duction can be recycled as feedstock, the Global Crop Production Since 1980,” numbers rescale accordingly, that is, the 1 W. Schlenker and M. J. Roberts, Science, 333(6042) (2011): pp. 616–20. price increase would be 20 percent. “Estimating the Impact of Climate 7 M.J. Roberts and W. Schlenker, b) Pollution reduction and yield gains Change on Crop Yields: The Importance “Identifying Supply and Demand of Nonlinear Temperature Effects,” NBER Elasticities of Agricultural Commodities: Current work in progress with Working Paper No. 13799, February Implications for the US Ethanol Mandate,” Christopher Boone and Juha Siikamäki 2008, published as “Nonlinear tem- NBER Working Paper No. 15921, April examines one factor that contributed to perature effects indicate severe damages 2010, and American Economic Review, the observed increase in average maize to U.S. crop yields under climate change,” forthcoming. yields: reduction in peak ozone levels.8 Proceedings of the National Academy of 8 C. Boone, W. Schlenker, and J. V. Roughly half of the observed trend in U.S. Sciences, 106(37) (2009): pp.15594–8. Siikamäki, “The Effect of Ground-level maize yields in 1993–2011 can be attrib- 2 W. Schlenker, W. M. Hanemann, Ozone on US Maize Yields,” Working uted to reduction in ozone, one of the and A.C. Fisher, “The Impact of Global Paper, January 2013. ambient air pollutants regulated under Warming on U.S. Agriculture: An the Clean Air Act. We construct a daily Econometric Analysis of Optimal Growing

NBER Reporter • 2013 Number 1 17 NBER Profile: Viral Acharya

Viral Acharya is a Research for general equilibrium. Associate in the NBER’s Program In 2011 Acharya received the on Corporate Finance and the C.V. inaugural Banque de France -Toulouse Starr Professor of Economics in the School of Economics Junior Prize in Department of Finance at New York Monetary Economics and Finance. University’s Stern School of Business. He is also one of four co-authors He received his Bachelor of of Guaranteed to Fail: Fannie Mae, Technology in Computer Science and Freddie Mac and the Debacle of Engineering from Indian Institute of Mortgage Finance, which was published Technology, Mumbai, in 1995 and his by Princeton University Press in March Ph.D. in Finance from NYU-Stern in 2011. 2001. He was a Professor of Finance Acharya lives in New York with his at the London Business School from wife, Manjiree, and son, Siddhant. His 2001–8 prior to joining the Stern hobbies include singing and composing faculty. semi-classical Indian music, running, Acharya’s primary research interest and cricket. He has raised funds in the is analysis of systemic risk in the finan- United States and the United Kingdom cial sector. This involves several topics, over a period of ten years for providing including credit risk and liquidity risk, education to under-privileged children their interactions and agency-theoretic in India. foundations, and their consequences

NBER Profile: Leah Platt Boustan

Leah Platt Boustan is a Research ment in 2006 as an assistant professor Associate in the NBER’s Programs on the and was promoted to her current position Development of the American Economy in 2012. She is also a Research Associate and Education. She is also an associate at the California Center for Population professor of Economics at the University Research. of California, Los Angeles. Her academic Boustan currently holds an Alfred interests lie at the intersection between P. Sloan Research Fellowship. In the economic history, labor economics, and 2013−14 academic year, she will be a urban economics. Her research focuses on Straus Fellow at the New York University the Great Black Migration from the rural School of Law on the theme of “Racial, south during and after World War II, and Ethnic and Economic Segregation.” the mass migration from Europe to the Boustan lives in Los Angeles with her United States in the late nineteenth and husband, Ra‘anan. Over the past few years, early twentieth centuries. she has been practicing blues lead guitar Boustan received her A.B. in on her Gibson Les Paul. She also enjoys Economics from Princeton University going to hear live music of all genres and in 2000 and her Ph.D. in Economics singing karaoke. from Harvard University in 2006. She joined the UCLA economics depart-

18 NBER Reporter • 2013 Number 1 NBER Profile: David Card

David Card directs the NBER’s was the co-editor of volumes 2–4 of the Program on Labor Studies and is the Handbook of Labor Economics. Class of 1950 Professor of Economics at In 1992 Card was elected a fellow of the University of California, Berkeley. the Econometric Society, and in 1998 he He received his B.A. in economics from was elected to the American Academy of Queen’s University (Kingston, Ontario) Arts and Sciences. In 1995 he received the in 1978 and his Ph.D. in economics from American Economic Association’s John Princeton University in 1983. He taught Bates Clark Prize, which is awarded to at Princeton University from 1983 to the economist under age 40 whose work 1996, and has held visiting appointments is judged to have made the most signifi- at Columbia and Harvard Universities cant contribution to the field. He was a and the Center for Advanced Study in the co-recipient of the IZA Labor Economics Behavioral Sciences. Award in 2006, and was awarded the His current research interests include Frisch Medal by the Econometric Society wage inequality, immigration, education, in 2007. and the evaluation of social programs. Card lives in Berkeley and Sonoma He has also worked on minimum wages, County with his wife, Cindy. His hob- labor supply, unemployment, and the bies include antique tractors and furni- effects of trade unions. He has co-edited ture making. two NBER volumes focused on com- parative labor market institutions, and

NBER Profile: Eswar Prasad

Eswar Prasad is a Research Associate from Brown University, and his Ph.D. in the NBER’s International Finance from the University of Chicago. He is the and Macroeconomics Program and the author or editor of several monographs Tolani Senior Professor of Trade Policy and books on financial regulation, China, and Professor at Economics at Cornell and India. His research interests include University. He is also a Senior Fellow at international finance, business cycles, the Brookings Institution, where he holds monetary policy, and emerging market the New Century Chair in International economies. Economics. Prasad and his wife Basia have two Prasad received a B.A. from the daughters, Berenika and Yuvika. University of Madras (India), an M.A.

NBER Reporter • 2013 Number 1 19 NBER Profile: Wolfram Schlenker

Wolfram Schlenker is a Research from the University of Karlsruhe Associate in the NBER’s Program on (Germany) in 1995, his Master of Environmental and Energy Economics. Environmental Management at Duke He has been on the faculty at the University in 1998, and his Ph.D. in University of California, Berkeley, Agricultural and Resource Economics Columbia University, and the University from Berkeley in 2003. of California, San Diego. He was also a He grew up in Stuttgart (Germany) visiting scholar at Stanford University, and now lives in Oakland, CA with his a Visiting Researcher at Princeton wife, Sophie, and their two-month old University, and a Gilbert White Fellow at daughter, Maya. In his free time, he likes Resources for the Future. to run, hike, and attend performing art Schlenker received his B.S. in events. Engineering and Management Science

Conferences

Fourteenth Annual Conference in India

On December 14–16, 2012 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 Shekhar Shah and Anil Sharma of NCAER. The NBER participants, in addition to the organizers, were: Nick Bloom, Stanford University; Markus Brunnermeier, Princeton University; Ricardo Caballero and Heidi Williams, MIT; Douglas Diamond, University of Chicago; Martin Feldstein, Harvard University; Daniel Fetter, Wellesley College; Pinelopi Goldberg, Yale University; Anne Krueger, Johns Hopkins University; and Karthik Muralidharan, University of California, San Diego. NBER Directors Jacob Frenkel of JP Morgan Chase and John Lipsky of Johns Hopkins University also participated in the meeting. The topics discussed included the prospects for financial regulatory reform;the role of media in governance; India’s position in the world economy; the determinants of long-term productivity growth; and the economic consequences of urbanization.

20 NBER Reporter • 2013 Number 1 NBER’s Africa Project Confers Again

The NBER Africa Project, organized by Research Associates Sebastian Edwards of the University of California, Los Angeles, Simon Johnson of MIT, and David Weil of Brown University brought together academic economists and East African policymak- ers in Zanzibar on December 18–19, 2012 for a policy-oriented discussion on “Meeting the Next Macroeconomic Challenges in Africa.” This conference was sponsored in collaboration with the Bank of Tanzania. The following topics were discussed:

• Robert Lawrence, Harvard University and NBER, “Regional Integration: What Does Europe Teach Us?”

• Stephen O’Connell, Swarthmore College, “Fiscal Foundations of Monetary Union in East Africa”

• Christopher Adam, Oxford University, “East African Transport Costs in the Short-run and the Long-run”

• S. Kal Wajid, IMF, “Financial Integration in the East African Community”

• Alan Taylor, University of Virginia and NBER, “The Great Leveraging”

• Simon Johnson, “The Next Financial Crisis”

• Jeffrey Frankel, Harvard University and NBER, “Dealing with the Resource Curse: How Can Commodity Exporters Reduce Procylicality?”

• Andrew Berg, IMF, “The Macroeconomic Management of External Resources”

More information about this meeting is available at: http://conference.nber.org/confer/2012/ADSf12/summary.html

Economics of Digitization

An NBER Conference on the Economics of Digitization took place at Stanford University on March 8, 2013. 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 of Management organized the meeting. These papers were discussed:

• Miguel Godinho de Matos, Pedro Ferreira, Rahul Telang, and Michael Smith, Carnegie Mellon University, “The Impact of Popularity on the Sales of Movies in Video-on-Demand: a Randomized Experiment”

• Ruben Enikolopov, Maria Petrova, and Konstantin Sonin, New Economic School, “Do Political Blogs Matter? Corruption in State-controlled Companies, Blog Postings, and DDoS Attacks”

• Garrett Johnson, Northwestern University, and Randall Lewis and David Reiley, Jr., Google, Inc., “Location, Location, Location: Proximity and Repetition Increase Effectiveness of Display Ads in Controlled Experiments”

• Tom Blake and Steven Tadelis, eBay Research Labs, and Chris Nosko, University of Chicago, “Consumer Heterogeneity and Paid Search Effectiveness: A Large Scale Field Experiment”

• Joel Waldfogel, University of Minnesota and NBER, and Imke Reimers, University of Minnesota, “Storming the Gatekeepers: Digital Disintermediation in the Market for Books”

NBER Reporter • 2013 Number 1 21 • Peter DiCola, Northwestern University, “Money from Music: Survey Evidence on Musicians’ Revenue and Lessons about Copyright Incentives”

• Avi Goldfarb and Brian Silverman, University of Toronto; Ryan McDevitt, University of Rochester; and Sampsa Samila, National University of Singapore, “The Effect of Social Interaction on Economic Transactions: An Embarrassment of Niches?”

Summaries of these papers are available at: http://www.nber.org/confer/2013/EoDs13/summary.html

Economics of Religion and Culture

An NBER Conference on “Economics of Religion and Culture,” organized by Research Associate Daniel Hungerman of University of Notre Dame, took place in Cambridge on March 8 and 9, 2013. These papers were discussed:

• Thomas Triebs and Justin Tumlinson, Ifo Institute for Economic Research at the University of Munich, “Learning Capitalism the Hard Way — Evidence from Germany’s Reunification”

• Saumitra Jha and Aprajit Mahajan, Stanford University, “Trade, the State, and Inter-Religious Trust: Evidence from South Asia”

• Asaf Zussman, Hebrew University, “The Effect of Political Violence on Religiosity: Evidence from Israel”

• Elaine Liu, University of Houston; Juanjuan Meng, Peking University; and Tao-Yi Wang, National Taiwan University, “Confucianism and Preferences: Evidence from Lab Experiments in Taiwan and China”

• Angela Dills and Rey Hernandez-Julian, Metropolitan State University of Denver, “Religiosity and State Welfare”

• Daniel Chen, ETH Zurich, and Susan Yeh, George Mason University, “How Do Rights Revolutions Occur? Theory and Evidence from First Amendment Jurisprudence, 1958–2008”

• Sanjeev Kumar, Yale University, and Jason Fletcher, Yale University and NBER, “Religion and Risky Health Behaviors among U.S. Adolescents and Adults”

• Daniel Hungerman, “The Effect of Education on Religion: Evidence from Compulsory Schooling Laws”

• Sonia Bhalotra, University Bristol; Guilhem Cassan, University of Namur; Irma Clots-Figueras, Universidad Carlos III Madrid; and Lakshmi Iyer, Harvard University, “Politician Identity and Health Outcomes: Does Religion Matter?”

Summaries of these papers may be found at: http://www.nber.org/confer/2013/RCs13/summary.html

22 NBER Reporter • 2013 Number 1 NBER News

2012 Awards and Honors

A number of NBER researchers received honors, awards, and other forms of professional recognition during 2012. A list of these honors, which excludes those that were bestowed by the researcher’s home university, is presented below.

Viral Acharya received the inaugu- Academy of Arts and Sciences and of Alessandra Casella was awarded a ral Banque de France-Toulouse School the Society of Labor Economists, and fellowship at the Straus Institute, NYU of Economics Junior Prize in Monetary won that Society’s Rosen Prize for Law School. Economics and Finance. He received Outstanding Contributions to Labor Amitabh Chandra was elected the National Stock Exchange of India Economics. to the National Academies’ Institute Best Paper Award for “Sovereign Debt, Javier Bianchi received the National of Medicine. He also was awarded the Government Myopia and the Financial Prize in Economics in Uruguay, awarded American Society of Health Economics Sector” (with Raghuram Rajan). by Universidad de la Republica, for medal recognizing the outstanding econ- “Liquidity Risk of Corporate Bond “Efficient Bailouts?” omist under age 40. He delivered the Returns” (co-authored by Yakov Amihud Alberto Bisin became a Fellow of George Burch Lecture to the Association and Sreedhar Bharath) received Second the Econometric Society. of University Cardiologists, and became Prize for the Cromwell Award given by Jeffrey Brown and Scott Editor of the Review of Economics and Pan Agora Asset Management. He was Weisbenner shared the BlackRock Statistics. also named a Director of the Western Research Award at the 25th Australasian Hui Chen won the Smith Finance Association. Finance and Banking Conference in Breeden Distinguished Paper Prize for Lee Alston won the Cliometric December 2012. “Macroeconomic Conditions and the Society’s Award for “Exceptional Service Richard Burkhauser (along with Puzzles of Credit Spreads and Capital to the Field of Cliometrics.” Jeff Larrimore and Kosali Simon) won Structure.” Andrew Ang and Dimitris Papani­ the 2012 Richard Musgrave Prize for Janet Currie is the 2013 Eleanor kolaou won second prize in the Roger F. the best paper published in the National Roosevelt Fellow of the American Murray Prize Competition. Tax Journal for “A Second Opinion on Academy of Political and Social Science Jeremy Atack served as President the Economic Health of the American and a Phi Beta Kappa Visiting Scholar. of the Economic History Association. Middle Class and Why it Matters in She was also named one of 100 “Alumni He was also elected a Fellow of the Gauging the Impact of Government of Influence” by University College, Cliometric Society. Policy.” University of Toronto, and she was David Autor was elected to the Charles Calomiris received an elected Vice President of the Society of American Academy of Arts and Sciences. Honorary Doctorate from the University Labor Economists. Katherine Baicker received the of Basel for his achievements in the fields Raj Chetty received the MacArthur Impact Award from AcademyHealth of banking history, banking regulation, Foundation Fellowship and was elected a for her work on the Oregon Health and financial fragility. Fellow of the Econometric Society. Insurance Experiment. She also was John Campbell gave the Keynote Philip Cook was elected Fellow named to the Board of Directors of Eli Address at the Society for Financial of the Academy of Experimental Lilly, and began serving as Chair of the Econometrics in Oxford, England; the Criminology. NIH’s SSPS Study Section. Morgan Stanley Lecture at the New Mario Crucini was elected President Richard Baldwin was awarded an Economic School in Moscow; the Purvis of the International Economics and Honorary Doctorate from the University Lecture at the Canadian Economic Finance Society and was selected to serve of St.Gallen, Switzerland. Association in Calgary; and the David on the Editorial Board of the Pacific Marianne Bertrand (and Adair Kinley Lecture at the University of Economic Review. Morse) won the Brattle Group Prize Illinois. Angus Deaton won the BBVA for “Information Disclosure, Cognitive Scott Carrell and Mark Hoekstra Frontiers in Knowledge Award in Biases and Payday Borrowing.” She won the IZA (Institute for the Study of Economics, Finance, and Management. also became a Fellow of the American Labor) Young Labor Economist Award. He also was awarded an honorary doc-

NBER Reporter • 2013 Number 1 23 torate in economics by the University of Award, a five-year Career Development Financial Association best paper award Cyprus. Award to pursue his project entitled for “Uncertainty, Risk, and Incentives: Rajeev Dehejia and Sadek Wahba’s “Interconnected Contexts: The Interplay Theory and Evidence.” paper, “Propensity Score Matching Between Genetics and Social Settings in Elhanan Helpman received Methods for Non-Experimental Youth Development.” the Onassis Prize and was elected Causal Studies” was selected among 50 Jeffrey Frankel received the Corresponding Fellow of the British Influential Articles published by MIT Abramson Scroll from the National Academy. Press over the last 50 years in the fields Association for Business Economics for Garth Heutel won the the Ralph of Arts and Humanities; Economics; his article “What Small Countries Can C. d’Arge and Allen V. Kneese Award International Affairs, History, and Teach the World.” for an Outstanding Publication in the Political Science; and Science and Xavier Gabaix received the Lagrange Journal of Environmental Economics Technology. Prize, given by the CRT Foundation for and Management for “Plant Vintages, Jan De Loecker received the Kiel research on complex systems. He also Grandfathering, and Environmental Institute’s Excellence Awards in Global received a Rising Star in Finance Award. Policy.” Economic Affairs for significantly con- Jordi Gali received the Research Bengt Holmstrom won the Banque tributing to expanding the knowledge National Prize, awarded by the de France-Toulouse School of Economics base in global economic research. Government of Catalonia. He also Senior Prize. Francis Diebold won the Kulp- served as President of the European Hilary Hoynes was appointed to the Wright Award from the American Economic Association. Advisory Committee for the Directorate Risk and Insurance Association for the Claudia Goldin served as President- for the Social, Behavioral, and Economic best book on the economics of risk, elect of the American Economic Sciences at the National Science The Known, the Unknown and the Association. She will assume the post Foundation. She also delivered the Joe Unknowable. He was also elected a of president at the Society’s Annual Tiao Lecture at Kansas State University Fellow of the International Institute of Meeting in January 2013. and was a distinguished speaker in Forecasters and is serving as President of Robert Gordon was the key- the series on “Deep Issues of the 2012 the Society for Financial Econometrics. note speaker at the 25th Annual Villa Elections” at Cornell University. Susan Dynarski testified before the Mondragone Conference hosted by Oleg Itskhoki received an U.S. Senate Finance Committee on her Rome’s Tor Vergata University. He was Excellence Award in Global Economic work in the field of higher education. also keynote speaker at a London confer- Affairs from the Kiel Institute for the Sebastian Edwards was awarded the ence on the “Future of Europe.” World Economy. Carlos Diaz-Alejandro Prize by the Latin Gene Grossman received the Joseph Kaboski won the Frisch American and Caribbean Economics Bernard Harms Prize from the Kiel Medal from the Econometric Society Association in October 2012. His lec- Institute for the World Economy. The with Robert M. Townsend for “A ture, delivered on that occasion, was biennial Prize — named after the founder Structural Evaluation of a Large-Scale titled “Economists as Storytellers.” of the Kiel Institute —honors scholars Quasi-Experimental Microfinance William Easterly received the Adam with a distinguished record in the field Initiative.” Smith Award from The Association of of international economics. Sebnem Kalemli-Ozcan was Private Enterprise Education. Michael Grossman was appointed selected as one of the three Inaugural fel- Roger Farmer will be the Senior to the Editorial Board of Economics and lows at the IMF. Houblon Norman Fellow at the Bank of Human Biology. Loukas Karabarbounis was England. Paola Giuliano was chosen as one of awarded the Royal Economic Society Amy Finkelstein received the John the Visiting Scholars at the Russell Sage Prize for the best paper published in the Bates Clark Medal from the American Foundation. She was also nominated Economic Journal for “One Dollar, One Economic Association. She was also associate editor for the Journal of the Vote.” elected a Fellow of the American European Economic Association. Robert Kaestner was named an Academy of Arts and Sciences and the Oliver Hart was awarded the NCHS Health Policy Fellow by the Econometric Society. Doctor of Laws, Honoris Causa, from National Center for Health Statistics Price Fishback was selected as a the University of Warwick. and AcademyHealth. Fellow of the Cliometric Society, a group Zhiguo He received the Smith- Edward Kane received the of quantitative economic historians. He Breeden First Prize for “Rollover Risk Thomas Divine Award for a Lifetime also was elected Executive Director of and Credit Risk,” the Swiss Finance of Contributions to Social Economics the Economic History Association. Institute’s Outstanding Paper Award and the Social Economy given by the Jason Fletcher was awarded a for “Macroeconomic Framework to Association for Social Economics. William T. Grant Foundation Scholars Quantify Systemic Risk,” and the Chinese Bryan Kelly won the AQR Insight

24 NBER Reporter • 2013 Number 1 Award for his paper “Market Expectations of the Cliometric Society, an award for Mark Pauly won the William in the Cross Section of Present Values”, career achievement in the field of eco- B. Graham Prize for Health Services co-authored with Seth Pruitt. He also nomic history. Research from the Baxter International won the JP Morgan Award for Best Paper Ellen McGrattan was elected a Foundation and the Association on Financial Institutions and Markets at Fellow of the Econometric Society. of University Programs in Health the WFA Annual Meeting for “Too- Antonio Merlo was elected a Fellow Administration. He also received the Systemic-To-Fail: What Option Markets of the Econometric Society. Victor R. Fuchs Lifetime Achievement Imply About Sector-Wide Government Bruce Meyer received the Emerald Award from the American Society of Guarantees,” co-authored with Hanno Literati Network Award for Excellence Health Economists, and is President- Lustig and Stijn Van Nieuwerburgh. for his paper “Consumption and Income elect of the American Society of Health William Kerr won the Kauffman Poverty Over the Business Cycle” (with Economists. Prize Medal for distinguished research in James X. Sullivan), published in Research Lasse Heje Pedersen won the entrepreneurship by a scholar under age in Labor Economics. Bernacer Prize for the Best European 40 and the FPD Academy Award for Best Robert Moffitt was elected a Fellow Union Economist under Age 40; the Research at the World Bank regarding of the American Academy of Arts and Michael Brennan Award for the Best Finance and Private Sector Development. Sciences. Paper in the Review of Financial Studies Christian Leuz won a Humboldt Adair Morse (with Marianne for “Margin-Based Asset Pricing and Research Award. He (with Richard Bertrand) won the Brattle Group First Deviations from the Law of One Price,” Lambert and Robert Verrecchia) also Prize award at the American Finance (with Nicolae Garleanu); the SFI received the Spängler IQAM Best Association meetings. She also won the Outstanding Paper Award for “Betting Paper Prize for “Information Precision, Commonfund Prize for the best paper Against Beta”; and the Nykredit Information Asymmetry, and the Cost in asset management at the European Research Prize. He was also elected to of Capital” published in the Review of Finance Association meetings. the Academia Europaea (the Academy Finance. Petra Moser was awarded an NSF of Europe). Jonathan Levin was selected as CAREER grant for her work on patents Robert Porter was elected Second a Young Global Leader by the World and innovation, as well as a Fellowship at Vice-President of the Econometric Economic Forum. the Center for Advanced Studies in the Society. He will serve as President in Nuno Limao was an invited speaker Behavioral Sciences (CASBS). 2015. for the Econometric Society Australasian Aldo Musacchio won the 2012 James Poterba served as the Meeting. Gerry Feldman Prize for the Best Research President-Elect of the Eastern Economic Robert Lipsey posthumously Article Published by Young Scholars Association. received the Kendrick’s Prize from the in the Financial History Review for James Rauch was awarded a Review of Income and Wealth for the best “Endowments, Fiscal Federalism, and Guggenheim Fellowship macro paper in the journal in the past the Cost of Capital for States: Evidence James Rebitzer (with co-authors two years. from Brazil, 1891–1930” with André C. Randall Cebul, Lowell Taylor, and Mark Andrew Lo was named one of the Martínez Fritscher. He also received the Votruba) won the 20th Annual Kenneth “Time 100” by Time magazine. He also Manuel Espinosa Yglesias Prize for the J. Arrow Award for best paper in Health delivered the 2012 Nash Distinguished best paper or book on banking, awarded Economics for “Unhealthy Insurance Lecture at Carnegie-Mellon University. by the Centro de Estudios Espinosa Markets: Search Frictions and the Cost Trevon Logan was elected President- Yglesias, for his paper with Stephen and Quality of Health Insurance.” Elect of the National Economic Haber, “These Are the Good Old Days: Hélène Rey won the first Birgit Association. Foreign Entry and the Mexican Banking Grodal Award, the Council of the Jens Ludwig was elected to the System.” European Economic Association’s prize Institute of Medicine of the National Lubos Pastor won the Smith to a European-based female economist Academies of Science. Breeden Prize for the best paper on capi- who has made a significant contribution Kalina Manova won a Hoover tal markets in the Journal of Finance for to the Economics profession. The award Institution National Fellowship. She “Uncertainty about Government Policy is named after Birgit Grodal, who passed also received the Excellence Award in and Stock Prices” co-written with Pietro away before she could take up her duties Global Economic Affairs, awarded by Veronesi. He also received the Whitebox as the first female president of the EEA. the Kiel Institute for World Economy to Advisors’ Selected Research Prize for Michael Roberts was named edi- young economists who have made sig- the best financial research of the year tor of the Journal of Finance, along with nificant contributions to the study of for “Are Stocks Really Less Volatile in Kenneth Singleton and Bruno Biais. globalization. the Long Run?” co-written with Robert Dani Rodrik gave the Colin Clark Robert Margo was elected a Fellow Stambaugh. Lecture at the Australasian Econometric

NBER Reporter • 2013 Number 1 25 Society Meetings in Melbourne and the Careers Person of the Year by Science Guarantees” with B. Kelly and H. Lustig. Roepke Lecture in Economic Geography Careers, the online career publication He also won best paper prize at the Utah at the Association of American of the journal Science, for her significant Winter Finance Conference for “Health Geographers conference in New York and sustained contribution to the wel- and Mortality Delta: Assessing the City. He was also elected a member of fare of early-career scientists. Welfare Costs of Household Insurance the Science Academy of Turkey. Richard Steckel was elected a Choice”, co-authored by R.Koijen Nancy Rose was elected Vice- Fellow of the Cliometric Society, an and M. Yogo. He was chosen one of President of the American Economic award for career achievement in the field the World’s Best 40 Business School Association. of economic history. Professors under the Age of 40 by Poets Raffaella Sadun won the Lars Svensson has been named a & Quants; and he received an Excellence Kauffman Junior Faculty Fellowship in Foreign Honorary Member of the AEA. in Refereeing Award from the American Entrepreneurship Research. Richard Sylla was elected a Fellow Economic Review. Jose Scheinkman was elected a of the American Academy of Arts and John Van Reenen was elected a Corresponding Member of the Brazilian Sciences, and re-elected chairman of the Fellow of the Econometric Society. Academy of Sciences. board of trustees of the Museum of Pietro Veronesi and Lubos Philipp Schnabl won the Brattle American Finance. Pastor were awarded the 2012 Smith Group’s First Paper Prize award for John Taylor received the Manhattan Breeden Distinguished Paper Prize for “The International Transmission of Institute’s Hayek Prize for First Principles: “Uncertainty about Government Policy Bank Liquidity Shocks: Evidence from Five Keys to Restoring America’s and Stock Prices.” an Emerging Market.” The prize is for Prosperity. The prize recognizes a book Jonathan Vogel was awarded an the best paper in the field of corporate published within the past two years that Alfred P. Sloan Research Fellowship. finance in the Journal of Finance. best reflects F.A. Hayek’s vision of eco- John Whalley won the Killam Prize, Peter Schott received an Emerald nomic and individual liberty. awarded annually to Canadian scholars Management Review Citation of Michele Tertilt was awarded a working in the humanities, social sci- Excellence Award. five-year ERC Grant for her research ences, natural sciences, health sciences, William Schwert received the on Gender Differences and the and engineering in recognition of career European Financial Management Macroeconomy. achievements. Readers’ Choice Award for Scholarship Sheridan Titman served as President Eugene White was awarded in Financial Research for “Stock of the American Finance Association. the Economic History Association’s Volatility during the Recent Financial Robert Townsend was awarded the Jonathan R.T. Hughes Prize for Crisis.” Jean-Jacques Laffont Prize in econom- Excellence in Teaching. Suzanne Scotchmer received an ics and, along with Joseph Kaboski, Heidi Williams was awarded an honorary doctorate from the University received the Frisch Medal of the NSF CAREER Grant for her research of Basel and was elected a Fellow of the Econometric Society for a paper on the on technological change in health care Econometric Society. structural evaluation of microfinance markets. Joel Slemrod received the National programs. He also was elected a mem- Michael Woodford won Tax Association’s Daniel M. Holland ber of the National Academy of Sciences. the American Economics Journal: Medal for outstanding contributions to Francesco Trebbi won the Bank of Macroeconomics Best Paper Prize for the study and practice of public finance. Canada Governor’s Award which recog- “Simple Analytics of the Government Robert Stambaugh and Lubos nizes outstanding Canadian academics Expenditure Multiplier.” Pastor received the Whitebox Selected at an early stage in their careers who are Wei Xiong and Zhiguo He won Research First Prize for “Are Stocks working on research critical to the Bank the Smith-Breeden Prize for best capital Really Less Volatile in the Long Run?” He of Canada’s mandate. market paper published in the Journal of and co-authors Jianfeng Yu and Yu Yuan Stijn Van Nieuwerburgh won the Finance. also received an AQR Insight Award JP Morgan Prize for the best paper at the Stanley Zin was elected a Fellow of Honorable Mention for “The Short of Western Finance Association for “Too- the Econometric Society. It: Investor Sentiment and Anomalies.” Systemic-To-Fail: What Option Markets Paula Stephan was named Science Imply about Sector-wide Government

26 NBER Reporter • 2013 Number 1 Program and Working Group Meetings

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 8, 2013. Matthias Doepke, Northwestern University, and Emmanuel Farhi, Harvard University, organized the meeting. These papers were discussed:

• Zhen Huo, University of Minnesota, and Jose-Victor Rios-Rull, University of Minnesota and NBER, “Engineering a Paradox of Thrift Recession”

• Simeon Alder, University of Notre Dame; David Lagakos, Arizona State University; and Lee Ohanian, University of California, Los Angeles and NBER, “The Decline of the U.S. Rust Belt: A Macroeconomic Analysis”

• Raj Chetty and John Friedman, Harvard University and NBER; Soren Leth-Petersen, University of Copenhagen; Torben Nielsen, The Danish National Center for Social Research; and Tore Olsen, Harvard University, “Active vs. Passive Decisions and Crowdout in Retirement Savings Accounts: Evidence from Denmark” (NBER Working Paper No. 18565)

• Lawrence Christiano and Martin S. Eichenbaum, Northwestern University and NBER, and Mathias Trabandt, Federal Reserve Board, “Unemployment and Business Cycles”

• Andrew Atkeson and Pierre-Olivier Weill, University of California, Los Angeles and NBER, and Andrea Eisfeldt, University of California, Los Angeles, “The Market for OTC Derivatives”

• Guido Menzio, University of Pennsylvania and NBER, and Greg Kaplan, Princeton University and NBER, “Shopping Externalities and Self-Fulfilling Unemployment Fluctuations”

Summaries of these papers may be found at: http://www.nber.org/confer/2013/EFGw13/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 22, 2013. These papers were discussed:

• Raven Molloy and Christopher Smith, Federal Reserve Board of Governors, and Abigail Wozniak, University of Notre Dame and NBER, “Declining Migration within the US: The Role of the Labor Market”

• Jesse Gregory, University of Michigan, “The Impact of Rebuilding Grants and Wage Subsidies on the Resettlement Choices of Hurricane Katrina Victims”

• Patrick Kline, University of California, Berkeley and NBER, and Melissa Tartari, Yale University, “What Distributional Impacts Mean: Welfare Reform Experiments and Competing Margins of Adjustment”

• Gary Chamberlain, Harvard University and NBER, “Predictive Effects of Teachers and Schools on Test Scores, College Attendance, and Earnings”

NBER Reporter • 2013 Number 1 27 • Gordon Dahl, University of California, San Diego and NBER; Dan-Olof Rooth and Magnus Carlsson, Linnaeus University; and Bjorn Ockert, Institute for Evaluation of Labour Market and Education Policy, “The Effect of Schooling on Cognitive Skills” (NBER Working Paper No. 18484)

• Edward Lazear and Kathryn Shaw, Stanford University and NBER, and Christopher Stanton, University of Utah, “The Value of Bosses” (NBER Working Paper No. 18317)

Summaries of these papers may be found at: http://www.nber.org/confer/2013/LSs13/summary.html

Industrial Organization Program Meeting

The NBER’s Program on Industrial Organization, directed by Nancy Rose of MIT, met in Stanford, CA on February 22 and 23, 2013. Ryan Kellogg, NBER and University of Michigan, and Gregory Lewis, NBER and Harvard University, organized the meet- ing. These papers were discussed:

• David Muir and Katja Seim, University of Pennsylvania, and Maria Ana Vitorino, University of Minnesota, “Drip Pricing When Consumers Have Limited Foresight: Evidence from Driving School Fees”

• Sanjog Misra, University of California, Los Angeles, and Harikesh Nair and Oystein Daljord, Stanford University, “Salesforce Composition and Compensation”

• Meghan Busse and Florian Zettelmeyer, Northwestern University and NBER, and Ayelet Israeli, Northwestern University, “Repairing the Damage: The Effect of Price Expectations on Auto-Repair Price Quotes”

• Allan Collard-Wexler, New York University and NBER, and Jan De Loecker, Princeton University and NBER, “Reallocation and Technology: Evidence from the U.S. Steel Industry” (NBER Working Paper No. 18739)

• Francesco Decarolis, Boston University, “What Does Medicare D Share with LIBOR and Procurement Auctions? The Distortionary Effects of the Low Income Subsidy”

• Ying Fan, Kai-Uwe Kuhn, and Francine Lafontaine, University of Michigan, “Financial Constraints and Franchising Decisions”

• Matthew Gentzkow and Jesse Shapiro, University of Chicago and NBER, and Michael Sinkinson, University of Pennsylvania, “Competition and Ideological Diversity: Historical Evidence from U.S. Newspapers” (NBER Working Paper No. 18234)

Summaries of these papers may be found at: http://www.nber.org/confer/2013/IOs13/summary.html

Health Care Program Meeting

The NBER’s Program on Health Care met in Cambridge on March 1, 2013. Program Director Jonathan Gruber, NBER and MIT, organized the meeting. These papers were discussed:

• Mireille Jacobson, RAND Corporation and NBER; Joseph Newhouse, Harvard University and NBER; and Craig Earle, Harvard University, “Can Physician Induced Demand Benefit Patients? Evidence from a Major Change to Medicare Chemotherapy Reimbursement Policy”

28 NBER Reporter • 2013 Number 1 • Robert Kaestner, University of Illinois and NBER, and Anthony Lo Sasso, University of Illinois, Chicago, “Does Seeing the Doctor More Often Keep You Out of the Hospital?”

• Jason Abaluck, Yale University and NBER, and Leila Agha, Boston University, “Negative Tests and the Efficiency of Medical Care: Investigating the Determinants of Imaging Overuse”

• Benjamin Handel, University of California, Berkeley and NBER, and Jonathan Kolstad, University of Pennsylvania and NBER, “Health Insurance for Humans: Information Frictions, Plan Choice, and Consumer Welfare”

• David Cutler, Harvard University and NBER; Jonathan Skinner, Dartmouth College and NBER; Ariel Stern, Harvard University; and David Wennberg, Dartmouth Medical School, “Physician Beliefs and Patient Preferences: A New Look at Supplier-Induced Demand”

Summaries of these papers are available at: http://www.nber.org/confer/2013/HCs13/summary.html

DAE Program Meeting

The NBER’s Program on the Development of the American Economy, directed by Claudia Goldin of Harvard University, met in Cambridge on March 2, 2013. The meeting was organized by Daniel Fetter and Eric Hilt, Wellesley College and NBER. These papers were discussed:

• Hoyt Bleakley, University of Chicago and NBER, and Joseph Ferrie, Northwestern University and NBER, “Land Openings on the Georgia Frontier and the Coase Theorem in the Short and Long Run”

• Melissa Dell, Harvard University and NBER, “Path Dependence in Development: Evidence from the Mexican Revolution”

• Leticia Arroyo Abad, University of California, Davis, and Noel Maurer, Harvard University and NBER, “Fiscal Receiverships and Charter Cities, 1904–31”

• Matthew Jaremski, Colgate University and NBER, and Peter Rousseau, Vanderbilt University, “The Rise of Commercial Bank Deposits in the United States”

• Marc Weidenmier, Claremont McKenna College and NBER; Joseph Davis, The Vanguard Group; and Ryan Shaffer, Claremont McKenna College, “America’s First Great Moderation”

• Charles Calomiris, Columbia University and NBER, and Jonathan Pritchett, Tulane University, “Betting on Secession: Quantifying Political Events Surrounding Slavery and the Civil War”

Summaries of these papers are available at: http://www.nber.org/confer/2013/DAEs13/summary.html

NBER Reporter • 2013 Number 1 29 Monetary Economics Program Meeting

The NBER’s Monetary Economics Program met at the Federal Reserve Bank of Chicago on March 8, 2012. NBER Research Associates Anil Kashyap and Amir Sufi, University of Chicago Booth School, organized this program:

• Gary Gorton and Andrew Metrick, Yale University and NBER, and Lei Xie, Yale University, “The Flight from Maturity”

• Samuel Hanson and Adi Sunderam, Harvard University, and David Scharfstein, Harvard University and NBER, “An Evaluation of Money Market Fund Reform Proposals”

• David Lucca and Emanuel Moench, Federal Reserve Bank of New York, “The Pre-FOMC Announcement Drift”

• James Costain and Anton Nakov, Bank of Spain, “Logit Price Dynamics”

• Matthias Doepke, Northwestern University and NBER, and Martin Schneider, Stanford University and NBER, “On the Optimality of a Dominant Unit of Account”

• Lars Svensson, Sveriges Riksbank and NBER, “The Possible Unemployment Cost of Average Inflation below a Credible Target”

Summaries of these papers may be found at: http://www.nber.org/confer/2013/MEs13/summary.html

*

30 NBER Reporter • 2013 Number 1 Bureau Books

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