Microeconomics & International Trade Seminars

Fall 2017

Thursday 1:403:00 p.m.
499 Engineering II

September 28
Natalie Cox, Princeton/SIEPR
"Pricing and Selection in the Student Loan Market: Evidence from Borrower Refinancing Decisions"
Host: George Bulman
Advances in data-driven underwriting have both efficiency and equity implications. In the $1.3 trillion student loan market, private lenders offer a growing distribution of risk-based interest rates, while the federal loan program sets a uniform price. I measure changes in consumer surplus that occur as low-risk types refinance out of the government pool into the private market. I use a dataset from an online refinancer to estimate a structural model that relates borrowers’ repayment choices to interest rates. I estimate refinancing increases low-risk surplus by $1,302, and show substantial distortionary costs (32% of the average transfer) under a pooled, uniform interest rate. To maintain access to the current uniform rate, the government must subsidize high-risk borrowers $1,507 on average.

October 19
Karthik Muralidharan, UC San Diego
“Disrupting Education? Experimental Evidence on Technology-Aided Instruction in India"
Host: Jon Robinson
We present experimental evidence on the impact of a personalized technology-aided after-school instruction program on learning outcomes. Our setting is middle-school grades in urban India, where a lottery provided winning students with a voucher to cover program costs. We find that lottery winners scored 0.36σ higher in math and 0.22σ higher in Hindi relative to lottery losers after just 4.5-months of access to the program. IV estimates suggest that attending the program for 90 days would increase math and Hindi test scores by 0.59σ and 0.36σ respectively. We find similar absolute test score gains for all students, but the relative gain was much greater for academically-weaker students because their rate of learning in the control group was close to zero. We show that the program was able to effectively cater to the very wide variation in student learning levels within a single grade by precisely targeting instruction to the level of student preparation. The program was cost effective, both in terms of productivity per dollar and unit of time. Our results suggest that well-designed technology-aided instruction programs can sharply improve productivity in delivering education.

October 24
Gustavo Bobonis, Toronto
"Vulnerability and Clientelism"
Host: Justin Marion
Political clientelism is often deemed to undermine democratic accountability and representation. This study argues that economic vulnerability causes citizens to participate in clientelism. We test this hypothesis with a randomized control trial that reduced household vulnerability through a development intervention: constructing residential water cisterns in drought-prone areas of Northeast Brazil.  This exogenous reduction in vulnerability significantly decreased requests for private benefits from local politicians, especially by citizens likely to be involved in clientelist relationships. We also link program beneficiaries to granular voting outcomes, and show that this reduction in vulnerability decreased votes for incumbent mayors, who typically have more resources to engage in clientelism. Our evidence points to a persistent reduction in clientelism, given that findings are observed not only during an election campaign, but also a full year later.

October 26
Laura Giuliano, UC Merced
"Fairness and Frictions: The Impact of Unequal Raises on Quit Behavior"
Host: Justin Marion
We analyze how quits responded to arbitrary differences in own and peer wages at a large U.S. retailer. Regression-discontinuity (RD) estimates imply large causal effects of own wages on quits. However, this own-wage response could reflect comparisons either to market wages or to the wages of peers within the store. RD estimates based on peer wages show similarly large effects, and imply that the own-wage quit response mostly reflects peer comparisons. The peer-wage response cannot be explained by rational updating about own future wage growth, and it is driven by cases where the peers are paid more than the worker—suggesting that workers are concerned about fairness. After accounting for peer effects, quits appear fairly insensitive to wages—consistent with significant labor-market frictions.

November 9
Federico Echenique, Cal Tech
"On Multiple Discount Rates"
Host: Natalia Lazzati
We study the problem of resolving conflicting discount rates via a social choice approach. We introduce several axioms in this context, seeking to capture the tension between allowing for intergenerational comparisons of utility, and imposing intergenerational fairness. Depending on which axioms are judged appropriate, we are led to one of several conclusions: utilitarian, maxmin, or a multi-utilitarian approach, whereby a utility stream is judged by the worst in a set of utilitarian weighting schemes across discount rates.

November 16
Gordon Dahl, UC San Diego
"Intergenerational Spillovers in Disability Insurance"
Host: George Bulman
Does participation in a social program by parents have spillovers on their children's use of public assistance, future labor market outcomes, and human capital investments? From a policy perspective, what a child learns from his or her parents about employment relative to government support could matter for the financial stability of a variety of social insurance and safety net programs. While intergenerational concerns have figured prominently in policy debates for decades, the evidence base is scarce due to nonrandom participation and data limitations. In this paper we exploit a 1993 policy reform in the Netherlands which tightened disability insurance (DI) criteria for existing claimants, and use rich panel data to link parents to children's long-run outcomes. The key to our regression discontinuity design is that the reform applied to younger cohorts, while older cohorts were exempted from the new rules. We find that children of parents who were pushed out of DI or had their benefits reduced are 11 percent less likely to participate in DI themselves and earn two percent more in the labor market as adults. There is no effect on children's participation in other government safety net programs. As a result, intergenerational spillovers caused both reduced government transfers and increased tax revenue, resulting in 5,900 euros in cumulative child spillovers per treated parent by 2014. We find intriguing evidence that children anticipate a future with less reliance on DI, with treated children investing in an extra .12 years of schooling on average. Our findings have important implications for the evaluation of the costs and benefits of this and other policy reforms: ignoring parent-to-child spillovers underestimates the cost savings of the Dutch DI reform in the long run by almost 30 percent in present discounted value terms.

November 30
Ben Hansen, U of Oregon
"Drug Trafficking Under Parital Prohibition: Evidence from Recreational Marijuana"
Host: Jeremy West
Marijuana is partially prohibited: though banned federally, it will soon be available to 21% of U.S. adults under state statutes. A chief concern among policy makers is marijuana trafficking from states with legal markets elsewhere. We measure trafficking with a natural experiment. Oregon opened a recreational market on October 1, 2015, next to Washington’s existing market. Using administrative data with the universe of recreational market sales, we find Washington retailers along the Oregon border experienced a 41% decline in sales following Oregon's market opening. In counties that are the closest crossing point for the majority of neighboring counties, the estimated decrease grows to 58%, and is the largest for the biggest transactions.  

December 7
Matthew Freedman, UC Irvine
"Is Your Lawyer a Lemon? Incentives and Selection in the Public Provision of Criminal Defense"
Host: Justin Marion
Governments in the U.S. must offer free legal services to low-income people accused of crimes. These services are frequently provided by assigned counsel, who handle cases for indigent defendants on a contract basis. Court-assigned attorneys generally garner worse case outcomes than privately retained attorneys. Using detailed court records from one large jurisdiction in Texas, we find that the disparities in outcomes are primarily attributable to case characteristics and within-attorney differences across cases in which they are assigned versus retained. The selection of low-quality lawyers into assigned counsel and endogenous matching in the private market contribute less to the disparities.

Winter 2018

February 22
David Atkin
Host: Alan Spearot