Consumption Dynamics During Recessions

Are there times when durable spending is less responsive to economic stimulus? We argue that aggregate durable expenditures respond more sluggishly to economic shocks during recessions because microeconomic frictions lead to declines in the frequency of households' durable adjustment. We show this by first using indirect inference to estimate a heterogeneous agent incomplete markets model with fixed costs of durable adjustment to match consumption dynamics in PSID microdata. We then show that aggregating this model delivers an extremely procyclical Impulse Response Function (IRF) of durable spending to aggregate shocks. For example, the response of durable spending to an income shock in 1999 is estimated to be almost twice as large as if it occurred in 2009. This procyclical IRF holds in response to standard business cycle shocks as well as in response to various policy shocks, and it is robust to general equilibrium. After estimating this robust theoretical implication of micro frictions, we provide additional direct empirical evidence for its importance using both cross‐sectional and time‐series data.     

AN EXPERIMENTAL STUDY OF ALTERNATIVE CAMPAIGN FINANCE SYSTEMS: TRANSPARENCY,DONATIONS, AND POLICY CHOICES

We experimentally study the transparency effect of alternative campaign finance systems on donations, election outcomes, policy choices, and welfare. Three alternatives are considered: one where donors' preferences and donations are unobserved by the candidate and public; one where they are observed by the candidate but not the public; and one where they are observed by all. We label them full anonymity (FA), partial anonymity (PA), and no anonymity (NA), respectively. We find that in NA and PA candidates consistently respond to donations by choosing policies favoring the donors. FA, in contrast, is the most successful in limiting the influence of donations on policy choices. Donors benefit greatly from the possibility of donations whereas social welfare may be harmed in some treatments. To our knowledge, this article is the first to investigate the effect of different campaign finance systems distinguished by their transparency level. (JEL D72)     

Deporting Fathers: Involuntary Transnational Families and Intent to Remigrate among Salvadoran Deportees

One‐fourth of deportees from the United States are parents of US‐citizen children. We do not know how separation from families affects remigration among deportees, who face high penalties given unlawful reentry. We examined how family separation affects intent to remigrate among Salvadoran deportees. The majority of deportees with children in the United States were also separated from their spouse, and the vast majority had US‐citizen children. Family separation was the single most important factor affecting intent to remigrate. We interpret these findings in light of immigration policy debates.     

Household Debt and Adult Depressive Symptoms in the United States

This study used data from Waves 1 (1987–1989) and 2 (1992–1994) of the National Survey of Families and Households in the United States and a series of regression models, some of which included individual-specific fixed effects, to estimate associations of particular types and levels of debt with adult depressive symptoms. Results suggest that household debt is positively associated with greater depressive symptoms. However, this association appears to be driven by short-term (unsecured) debt; we found little evidence of associations with depressive symptoms for mid- or long-term debt. The link between short-term debt and depressive symptoms persisted with alternative estimation strategies, including defining debt in absolute and relative terms. Furthermore, this association was particularly concentrated among 51–64 year-old adults, those with a high school education or less, and those who were not stably married throughout the observation period. These findings suggest that short-term debt may have an adverse influence on psychological wellbeing, particularly for those who are less educated, approaching retirement age, or unmarried.     

A Learning Curve Analysis of Expert System Use*

In this article, we study how an expert system affects novice problem solving in a financial risk analysis domain. We demonstrate that novice performance is improved after exposure to an expert system. Further, we show that novice performance continues to improve when the system is withdrawn. By comparing learning curves for people with exposure to those without, we can assess how much the system has benefitted its users. We demonstrate a quantitative methodology to measure the increment of learning due to the use of an information technology. We also explore the issue of how expertise is transferred from the system to the user.     

Long-Term Earnings Differentials Between African American and White Men by Educational Level

This paper investigates long-term earnings differentials between African American and white men using data that match respondents in the Survey of Income and Program Participation to 30 years of their longitudinal earnings as recorded by the Social Security Administration. Given changing labor market conditions over three decades, we focus on how racial differentials vary by educational level because the latter has important and persistent effects on labor market outcomes over the course of an entire work career. The results show that the long-term earnings of African American men are more disadvantaged at lower levels of educational attainment. Controlling for demographic characteristics, work disability, and various indicators of educational achievement does not explain the lower long-term earnings of less-educated black men in comparison to less-educated white men. The interaction arises because black men without a high school degree have a larger number of years of zero earnings during their work careers. Other results show that this racial interaction by educational level is not apparent in cross-sectional data which do not provide information on the accumulation of zero earnings over the course of 30 years. We interpret these findings as indicating that compared to either less-educated white men or highly educated black men, the long-term earnings of less-educated African American men are likely to be more negatively affected by the consequences of residential and economic segregation, unemployment, being out of the labor force, activities in the informal economy, incarceration, and poorer health.     

Parenting in the Context of Deportation Risk

Nearly 5.1 million children younger than age 18 live with at least one undocumented parent, about 7% of the U.S. child population. Between 2010 and 2013, an estimated 300,000 parents of U.S. citizen children were deported. Raising children in the context of deportation risk increases overall parenting stress for undocumented Latino parents. To investigate this and understand the experience of undocumented parenting, the authors interviewed 70 undocumented parents in two Southwest cities from 2012 to 2013. The authors frame their analysis using the lens of the problem of “illegality.” There are three domains of stressors associated with parenting in the context of deportation risk: trapped parenting, threat of family separation, and altered family processes. The authors discuss these findings in the context of the literature on undocumented families and parenting stress and connect these findings to the current sociopolitical context experienced by Latino families in the United States .     

Racial and Ethnic Differentials in Idleness,Highest-Risk Idleness,and Dropping Out of High School

This research investigates three different indicators of at-risk socio-demographic conditions including dropping out of high school, being idle, and being in highest-risk idleness among non-immigrant persons aged 19–24. Using data from the 2000 US Census, our results detail the differentials in these characteristics for 30 different racial/ethnic groups that are further broken down by gender. The findings indicate a wide range in the prevalence of these at-risk socio-demographic conditions. Groups that tend to be the most at-risk in terms of these indicators include African Americans, Cambodians, Laotians, Native Americans, other Hispanic whites, and white Mexicans. With the exception of the other Pacific Islander and Thai, young women have lower high school dropout rates than do young men. However, young women are substantially more likely than young men to be idle which we define as not being in school, the labor force, or the military. After defining highest-risk idleness as never-married persons without children who are idle, however, the rates are slightly lower for young women than for young men.     

Bringing Productivity Back In: Rising Inequality and Economic Rents in the U.S. Manufacturing Sector, 1971 to 2001

Using data on earnings and productivity for U.S. manufacturing industries from 1971 to 2001, we investigate economic rents and rising income inequalities. The results suggest that rents are most significant for managers, professionals, middle‐aged workers, and older workers. Conversely, negative rents are evident for women, Hispanics, single men, and blue‐collar workers. The underpayment of Hispanics appears to have increased while African Americans have gone from being underpaid to being overpaid. Workers with a college degree have become overpaid (i.e., “credentialism”) while “gift‐exchange” efficiency wages have declined. The marginal productivity of labor input has increased but is increasingly underpaid.     

Bargaining over waiting time in ultimatum game experiments

While preference-based explanations play an increasing role in economics and sociology, the accurate measurement of social preferences deserves more attention. Most laboratory experiments measure social preferences by studying the division of “a cake that nobody had to bake” (Güth and Kliemt, 2003). This article reports results of the first ultimatum game experiment with bargaining over waiting time. The experiment was created to avoid effects of windfall gains. In contrast to donated money, time is not endowed by the experimenter and implies a natural loss to subjects. This allows for a better measurement of the inherent conflict in the ultimatum game. We implemented three anonymity conditions; one baseline condition, one condition with anonymity among subjects and one double-blind condition in which the experimenter did not know the division of waiting time. While we expected to observe less other-regarding behavior in ultimatum game bargaining over time, our experimental results rather confirm previous ultimatum game experiments, in which people bargained over money. The modal offer was half of the waiting time and only one offer was rejected. Interestingly, anonymity did not change the results significantly. In conclusion, our experiment confirms other-regarding behavior in the ultimatum game.