RELIGIOUS HOMOPHILY IN A SECULAR COUNTRY: EVIDENCE FROM A VOTING GAME IN FRANCE

Homophily—the tendency individuals have to associate with similar‐others—is a powerful determinant of social networks. Yet research to date does not allow us to determine which dimension, e.g., ethnic, religious, gender, age, or class similarity, drives association. Tests demonstrating homophily are flawed by restricting the range of dimensions in the choice set. We introduce an experimental game in which we exogenously expose subjects to diverse partners to determine which dimension dominates. We find that in a socio‐demographically diverse district of Paris, despite expectations of secularization, religious similarity significantly predicts homophily. Moreover, we provide tentative evidence that religious homophily is taste‐based. (JEL C91, D03, D72, J71, Z12)     

INPUT TRADE LIBERALIZATION AND MARKUP DISTRIBUTION: EVIDENCE FROM CHINA

We utilize an unprecedented liberalization episode in China, namely its World Trade Organization accession, to estimate the impact of trade liberalization on firm markup and markup distribution. Using a panel data quantile regression, we show that the impact of tariff reduction on markup can be heterogeneous to different firms, resulting in an unevenly distributed markup change across firms. In particular, reduction in output tariff reduces markup and markup dispersion, while reduction in input tariff increases markup and markup dispersion. (JEL F12, F13)     

PARENTAL SUBSTANCE USE AND FOSTER CARE: EVIDENCE FROM TWO METHAMPHETAMINE SUPPLY SHOCKS

Foster care caseloads have nearly doubled over the last three decades. Parental methamphetamine (meth) use grew significantly during the same period. While child welfare workers and law enforcement claim that parental meth use contributes to foster care growth, the evidence for a causal effect has not been determined. This paper presents the first evidence of a causal effect of meth on foster care admissions using two exogenous supply‐side interventions in meth markets from the late 1990s for identification. First, we find that restrictions on meth precursor distribution caused meth use (proxied by white meth self‐referred treatment cases) to decline 4.1%. Second, using two‐stage least squares, we estimate a positive elasticity of foster care cases with respect to meth use of 1.54. We also estimate elasticities of 1.03 and 1.49 for cases of child neglect and parental abuse, respectively. These results suggest that child welfare policies should be designed specifically for the children of meth‐using parents. (JEL I12, J13, K42)     

POLITICAL IDEOLOGY AND ECONOMIC GROWTH: EVIDENCE FROM THE FRENCH DEMOCRACY

We provide a test of the impact of voters' political ideology on economic growth and of the role of preferences for government size as a transmission channel. We focus on France from the beginning of its stable democratic experience in 1871. A move of voters' ideology to the right increases economic growth over the total observation period. However, the growth effect of ideology is mediated by voters' preferences for government size only during the post‐World War II period. For reverse causality concerns, we use the political ideology of other historical democracies as an instrument variable for France's ideology. (JEL E6, O43, H11)     

TRADE COSTS AND JOB FLOWS: EVIDENCE FROM ESTABLISHMENT‐LEVEL DATA

Changes in the costs of trading inputs or final goods affect establishment‐level job flows. Using a longitudinal database containing the universe of manufacturing establishments in California from 1992 to 2004, we find that a decline in input or final‐good trade costs is associated with job destruction in the least productive establishments, job creation in the most productive establishments, and an increase in the death likelihood of the least productive establishments. The evidence is consistent with predictions of models of trade with heterogeneous firms. Additionally, the evidence shows that the effects of input trade costs on establishment‐level job flows are larger than the effects of final‐good trade costs. (JEL F14, F16)     

ASYMMETRY IN THE EFFECTS OF MONETARY AND GOVERNMENT SPENDING SHOCKS: CONTRASTING EVIDENCE AND IMPLICATIONS

Using quarterly data for the United States, demand contraction exceeds expansion in the face of monetary and government spending shocks. Demand contraction in the face of government spending shocks, is absorbed in nominal wage and price deflation. The variability of government spending shocks decreases average wage and price inflation. In contrast, the upward flexibility of price appears in sharp contrast to its downward rigidity in the face of monetary shocks. Furthermore, output contraction is notably larger relative to expansion in the face of monetary shocks. Monetary variability accelerates average price inflation and decreases average output and real wage growth.     

THE LOCAL ECONOMIC IMPACT OF A LARGE RESEARCH UNIVERSITY: EVIDENCE FROM UC MERCED

In this paper, I estimate the short‐run economic effects of the opening of The University of California, Merced in 2005 by comparing Merced with a counterfactual constructed by the synthetic control method. During the period 2005–2014, the opening of the campus has increased local employment by 13%, mainly in nontraded industries, such as the service sector. These findings suggest that a large research university could bring immediate benefits to the local economy because of its large demand from students and employees. (JEL J24, O18, R11)     

POPULAR SUPPORT FOR TRADE AGREEMENTS AND PARTNER COUNTRY CHARACTERISTICS: EVIDENCE FROM AN UNEXPECTED ELECTION OUTCOME

Using quasi‐experimental data from a survey that was conducted immediately before and after the November 2016 presidential election, we analyze how the election of Donald Trump affected the willingness of Europeans to sign a trade and investment agreement with the United States. We find that the election outcome lead to an immediate and sizable negative effect on Europeans' image of the United States. But we do not find that, at the same time, there was a negative reaction in the willingness of Europeans to sign an agreement with the United States. (JEL F14, F55, C26, F50)     

IQ IN THE PRODUCTION FUNCTION: EVIDENCE FROM IMMIGRANT EARNINGS

We show that a country’s average IQ score is a useful predictor of the wages that immigrants from that country earn in the United States, whether or not one adjusts for immigrant education. Just as in numerous microeconomic studies, 1 IQ point predicts 1% higher wages, suggesting that IQ tests capture an important difference in cross‐country worker productivity. In a cross‐country development accounting exercise, about one‐sixth of the global inequality in log income can be explained by the effect of large, persistent differences in national average IQ on the private marginal product of labor. This suggests that cognitive skills matter more for groups than for individuals. (JEL J24, J61, O47)     

DOMESTIC CONTENT LEGISLATION: HOUSE VOTING AND THE ECONOMIC THEORY OF REGULATION

House voting on domestic content legislation provides a rare opportunity to examine the political economy of protectionism with respect to a particular issue rather than by using the traditional interindustry approach. The results indicate that a representative's vote in favor of the content legislation and the intensity of the legislator's preferences are positively related to the importance of the auto and steel industries in the representative's district, an increasing unemployment rate, campaign contributions from labor groups, affiliation with Democratic Party, and a liberal ideology. Despite ideology's statistical significance, the results suggest this variable can be disregarded because neither the predictive accuracy nor the explanatory power of the model is improved by its inclusion. The estimates also provide insights concerning the impact of changes in the independent variables upon voting patterns.     

DIVIDEND POLICY IN REGULATED NETWORK INDUSTRIES: EVIDENCE FROM THE EU

We study the dividend policy of firms in regulated network industries, focusing on the impact of different regulatory regimes and government control. We link payout and smoothing decisions to different regulatory mechanisms (cost‐based vs. incentive regulation) and state versus private ownership. We test our predictions on a panel of listed European electric utilities, accounting for potential endogeneity of the choice of regulatory and ownership patterns. We find that incentive‐regulated firms smooth their dividends less than cost‐based regulated firms and that they report higher target payout ratios. Consistent with the interest group theory of regulation, we find that incentive regulation schemes are less likely when the state is still an important shareholder in the sector. Additionally, our results show that government control undermines the efficiency‐enhancing effects of incentive regulation on dividend policy, for example, lower smoothing is only due to private firms. (JEL G35, L51, L32, L9)     

FISCAL STRUCTURES AND ECONOMIC GROWTH: INTERNATIONAL EVIDENCE

Our paper systematically examines the effects of fiscal structure on economic growth. We find that for developing countries, debt-financed increases in government expenditure retard growth and tax-financed increases stimulate growth, while for developed countries, debt-financed increases in government expenditure do not affect growth and tax-financed increases lower growth. We impose the government budget constraint on the regression equations so that the precise changes in fiscal policy can be identified (e.g., the effect of a debt-financed increase in health expenditure), employing a pooled cross-section, time-series sample and fixed- and random-effect methods. (JEL 04, E6)     

PRODUCT SAFETY IN A REGULATED INDUSTRY: EVIDENCE FROM THE RAILROADS

It is sometimes argued that a relaxation of price controls in a regulated industry would lead to a decrease in profits and hence to an incentive for firms to skimp on safety. Theory does not allow us to sign the relationship between prices and safety a priori. Analysis of data from the railroad industry from 1963–67 indicates 1) profitable railroads have fewer accidents per mile than do unprofitable roads; 2) for profitable roads, if there is any relationship at all between accidents and profitability it is positive: more profitable roads have more accidents (per mile); and 3) for unprofitable roads, accident rates rise as losses rise.     

NONLINEAR BUSINESS CYCLE DYNAMICS: CROSS-COUNTRY EVIDENCE ON THE PERSISTENCE OF AGGREGATE SHOCKS

We look for asymmetries in the dynamics of real GDP growth for the G7 countries, using a model by Beaudry and Koop that allows the depth of a recession to influence the rate of growth of output. We find evidence supporting these nonlinearities in four countries, including the United States, but we do not find evidence that the asymmetries are common even among the four countries exhibiting asymmetric behavior. A modification of the model to distinguish between the recession and recovery phases of a business cycle does not change this general finding. The asymmetries discovered by Beaudry and Koop do not appear to be common among the G7 nations. (JEL E32)     

MITIGATING HYPOTHETICAL BIAS IN STATED PREFERENCE DATA: EVIDENCE FROM SPORTS TOURISM

One of the major criticisms of stated preference data is hypothetical bias. Using a unique dataset of both stated and actual behavior, we test for hypothetical bias of stated preference survey responses. We consider whether respondents tend to overstate their participatory sporting event behavior ex ante when compared to their actual behavior at different registration fees. We find that stated behavior accurately predicts actual behavior at a middle level of respondent certainty, overpredicts actual behavior at a lower level of certainty, and underpredicts behavior at a higher level of certainty. This result suggests that respondent uncertainty corrections can be used to mitigate hypothetical bias and stated preference data can be used to better understand actual behavior in situations where no data exist. (JEL L83, Q51, Z2)     

PEER EFFECTS IN A COMPETITIVE ENVIRONMENT: EVIDENCE FROM THE PGA TOUR

This study uses putting on the PGA TOUR to examine peer effects in a competitive setting. The nature of play in golf, in which players complete tasks in a discrete order with a group of randomly assigned peers, provides a unique opportunity to observe these effects among individuals competing in a high‐stakes tournament. Players have the chance both to learn from their peers, as well as to be psychologically impacted by peer success or failure. We find that learning by observing peers has a positive impact on a player's performance, while peer outcomes are negatively correlated with a player's own performance. (JEL D03, D83, L83)     

RAISING THE STAKES IN THE ULTIMATUM GAME: EXPERIMENTAL EVIDENCE FROM INDONESIA

The ultimatum game has generated considerable interest because experimental evidence strongly rejects the standard game-theoretic predictions. A limitation to this general result is the possibility that experimental results are an artifact of small stakes. Implementing the ultimatum game in Indonesia makes it possible to raise the stakes to three times the monthly expenditure of the average participant. Even with these sizable incentives, results do not uniformly approach the sub-game perfect, selfish outcomes. More specifically, responders become more willing to accept a given percentage offer at higher stakes, but proposer behavior is largely invariant to stake changes. ( JEL C91, C78)     

HETEROGENEITY IN STATE‐DEPENDENT UTILITY: EVIDENCE FROM STRATEGIC SURVEYS

A standard result of life‐cycle models under uncertainty is that optimizing individuals equate the expected marginal utility of consumption across states of the world if insurance is available at actuarially fair rates. A small empirical literature has suggested that the marginal utility of consumption is lower in less healthy states. We use a novel survey‐based measure to document significant heterogeneity in health‐state dependence across individuals largely orthogonal to standard controls. We further show that individuals value unhealthy states of the world more when facing work‐limiting disabilities than when facing disabilities requiring long‐term care, and when facing physical rather than mental disabilities. (JEL D12, I10)