Microeconomics & International Trade Seminars

Spring 2019

Thursday 1:40–3:00 p.m.
499 Engineering II

April 4
Michael Koelle, Oxford University
"Microenterprises and the Lure of Wage Work: Theory and Evidence from Mexican Export Manufacturing"
Host: Ajay Shenoy
Abstract:
This paper provides a model and empirical evidence on how job prospects for entrepreneurs limit the growth of owner-operated firms. When job opportunities are uncertain and liquidation is costly, a forward-looking entrepreneur will reduce the size of their firm below its potential if they anticipate a chance of receiving an attractive job offer and switching occupations. I formalise this mechanism with a model where productive decisions and occupational choices are mutually dependent. With a detailed, representative and comprehensive dataset on almost one million microenterprises in Mexico and administrative records on export-dependent jobs that are plausibly exogenous to local market conditions, I test the mechanism empirically. I find evidence in support of the model predictions. Entrepreneurs take up wage jobs when export manufacturing expands, and their firms grow less in anticipation of this. Tracing news on automotive plant expansions, I show that entrepreneurs react to future job creation only once it becomes public knowledge. The theoretical results and empirical findings provide a new mechanism to explain small firm performance. They imply a role for policy to target a long-term comparative advantage in entrepreneurship.


April 11
Fred Finan, UC Berkeley
"Economic Losers and Political Winners: Sweden'ts Radical Right "
Host: Ajay Shenoy
Abstract:
We study the politicians and voters of Sweden’s Radical Right. The rise of the Sweden Democrats is descriptively linked to macroeconomic events that magnified job insecurity and stagnated disposable incomes in large segments of the labor market. Negatively impacted groups entered politics to build the Sweden Democrats, and voting for the party concentrated in localities suffering larger impacts. Survey data suggest that economic anxiety may have triggered radical-right mobilization by weakening social and institutional trust among those with anti-immigrant preferences. We characterize the Sweden Democrats as a citizen-candidate movement that channeled inexperienced citizens from negatively impacted groups into politics. The party’s entry shifted political selection for soft and hard valence traits in a negative direction.


April 18
Michael Lovenheim, Cornell University
"The Effect of State Funding for Postsecondary Education on Long-Run Student Outcomes"
Host: George Bulman
Abstract:
Most public colleges and universities rely heavily on state financial support for operation. As state budgets have tightened over the past several decades, appropriations for higher education have declined substantially, especially at less-selective institutions that tend to serve students with lower levels of collegiate preparation. Despite concerns expressed by policymakers and scholars that the declines in state support have reduced the return to education investment for public sector students, little evidence exists that can identify the causal effect of these funds on long-run student outcomes. We present the first such analysis in the literature using new data that leverages the merger of two rich datasets: consumer credit records from New York Fed's Consumer Credit Panel (CCP) sourced from Equifax and administrative college enrollment and attainment data from the National Student Clearinghouse. We overcome identification concerns related to the endogeneity of state appropriation variation using an instrument that interacts the baseline share of total revenue that comes from state appropriations at each public institution with yearly variation in state-level appropriations per college-age resident. This \shift-share" instrument exploits the fact that a statewide change in appropriations for higher education will have larger effects on institutions that are more reliant on state funds. Our focus is on state appropriation shocks that occur when students are already enrolled in college, which allows us to abstract from extensive margin effects. We examine the effect of state appropriations among 25-30 year olds and 30-35 year olds, separately by whether students initially enrolled in a four-year or two-year institution. Our findings indicate that state appropriation shocks students experience in college have long-lasting impacts on their life outcomes into their mid-30s. Among students whose first college is a four-year institution, state appropriation increases during college lead to a lower probability of having any student loan debt, lower student debt balances, higher credit scores, and increased likelihood of owning a car and a home. For two-year students, state appropriations increases lead to higher credit scores, an increased likelihood of owning a car and a home, and higher auto and home mortgage loan balances. Our results underscore the importance of state support for higher education in driving the returns students experience to investing in college and highlight the role played by declining state appropriations in increasing inequality and stratification of outcomes in the postsecondary sector.


April 25
Matt Backus, Columbia University
"Common Ownership in America, 1980-2017"
Host: Natalia Lazzati
Abstract:
When competing firms possess overlapping sets of investors, maximizing shareholder value may provide incentives that distort competitive behavior, affecting pricing, entry, contracting, and virtually all strategic interactions among firms. We propose an approach to the measurement of this phenomenon for the universe of S&P 500 firms between 1980 and 2017. Over this period, the incentives implied by the common ownership hypothesis have grown dramatically. Contrary to popular intuition, this is not primarily associated with the rise of BlackRock, Vanguard, and State Street: instead, the trend in the time series is driven by a broader rise in diversified investment strategies, of which these firms are only the most recent incarnation. In the cross section, there is substantial variation that can be traced, both in the theory and the data, to observable firm characteristics — particularly the share of the firm held by retail investors. Finally, we show how common ownership can theoretically give rise to incentives for expropriation of undiversified shareholders via tunneling, even in the Berle and Means (1932) world of the “widely held firm.


May 9
Hunt Allcott, NYU
"The Welfare Effects of Social Media"
Host: Jeremy West
Abstract:
The rise of social media has provoked both optimism about potential societal benets and concern about harms such as addiction, depression, and political polarization. We present a randomized evaluation of the welfare eects of Facebook, focusing on US users in the runup to the 2018 midterm election. We measured the willingness-to-accept of 2,743 Facebook users to deactivate their Facebook accounts for four weeks, then randomly assigned a subset to actually do so in a way that we veried. Using a suite of outcomes from both surveys and direct measurement, we show that Facebook deactivation (i) reduced online activity, including other social media, while increasing oine activities such as watching TV alone and socializing with family and friends; (ii) reduced both factual news knowledge and political polarization; (iii) increased subjective well-being; and (iv) caused a large persistent reduction in Facebook use after the experiment. Deactivation reduced post-experiment valuations of Facebook, but valuations still imply that Facebook generates substantial consumer surplus.


May 16 - CANCELLED
Shelly Lundberg, UC Santa Barbara
Host: Rob Fairlie / Laura Giuliano


May 23
Lucas Davis, UC Berkeley
"Two Empirical Tests of Hypercongestion"
Host: Jeremy West
Abstract:
There is a widely-held view that as demand for travel goes up, this decreases not only speed but also the capacity of the road system, a phenomenon known as hypercongestion. We revisit this idea. We propose two empirical tests motivated by previous analytical models of hypercongestion. Our first test uses instrumental variables to empirically isolate the effect of travel demand on highway capacity. Our second test uses an event study analysis to measure changes in highway capacity at the onset of queue formation. We apply these tests to three highway bottlenecks in California for which detailed data on traffic flows and vehicles speeds are available. Neither test shows evidence of a reduction in highway capacity at any site during periods of high demand. Across sites and specifications we have sufficient statistical power to rule out small reductions in highway capacity. This lack of evidence of hypercongestion has important implications for travel supply and demand models and raises questions about highway metering lights and other traffic interventions aimed at regulating demand.


June 6
Matt Harding, UC Irvine
"A Structural Approach to Dynamic Energy Pricing and Consumer Welfare"
Host: Jessie Li
Abstract:
With the proliferation of smart meters and smart homes, there is growing interest from utilities in policies that exert control over demand in the electricity market. Time of use pricing is an approach to demand side management that charges a different marginal price for electricity during the peak usage hours of the day. We analyze a panel of high frequency observations taken from a randomized control trial in the summer of 2011. Experimental treatments include two price structures over the peak of the day, as well as four technologies for information provision about the prevailing marginal cost of electricity. We estimate a market demand curve for each hour of the day using a structural demand system. Relative to an untreated control group, treated households face periods of both elevated and reduced prices. This pricing structure potentially contributes to consumer welfare by providing the opportunity to shift consumption from high to low price periods. We investigate the degree to which consumer demand response varies relative to the household’s location within the distribution of hourly demand. This allows for a naive estimation of average consumer welfare. Additionally, we compute the change in total welfare across households when heterogeneity is introduced across consumer demographics.



Winter 2019

February 21
Christopher Timmins, Duke University
"Housing Discrimination and the Pollution Exposure Gap in the U.S."
Host: Jeremy West
Abstract:
The choice of residential location is a critical economic decision for households in the United States. Recent research has shown that neighborhood pollution exposures can have signicant eects on health outcomes, disproportionately aecting minority households. In this study, we combine experimental evidence on discrimination in the rental market for housing with observational evidence from a panel detailing the movements of 1.5 million renter households to study the extent to which discrimination constrains the housing choices of minorities and contributes to inequity in health outcomes. We nd that renters with African American and Hispanic/LatinX names receive the exact same response rates to inquiries made for housing within a tight radius of plants that emit toxic pollutants (high exposure locations), while receiving up to 35% and 36% lower response rates at lower exposure locations in the same markets. We find that African American and Hispanic/LatinX renters in these markets move into high exposure neighborhoods at higher rates and move out at lower rates than similar white households, resulting in higher exposures to toxics and particularly during periods of pregnancy. These dierences result in a 19% higher likelihood of in utero exposures to toxic emissions for children born in Hispanic/LatinX households and 16.6% higher likelihoods for children born in African American households.


February 28
Pascaline Dupas, Stanford U
"The Incidence of Public Subsidies to Private Hospitals under Weak Governance: Evidence from India"
Host: Jon Robinson



Fall 2018

October 18
Paul Oyer, Stanford
"The Gender Earnings Gap in the Gig Economy: Evidence from over a Million Rideshare Drivers"
Host: George Bulman


November 1
Hilary Hoynes, Berkeley
"The Impact of Childhood Nutrition Assistance on Child Health & Well-Being: Lessons from WIC"
Host: George Bulman / Laura Giuliano


November 8
Priya Mukherjee, William & Mary
"Pricing Private Education in Urban India: Demand, Use, and Impact"
Host: Ajay Shenoy


November 15
Jeremy Fox, Rice
"Geographic Expansion Mergers and FCC Spectrum Policy: Estimating a Matching Game with Externalities"
Host: Natalia Lazzati


December 5 (Note different day)
Bruce Meyer, U. Chicago
"The Use and Misuse of Income Data and the Rarity of Extreme Poverty in the United States"
Host: Rob Fairlie
Abstract:
Recent research suggests that rates of extreme poverty, defined as living on less than either $2 or $4 per-person per-day, are high and rising in the United States. We re-examine the rate of extreme poverty using the Survey of Income and Program Participation (SIPP), generally thought to have the most accurate survey income data in the U.S. In addition to income, the SIPP provides information on hours worked, assets, hardships, and other household characteristics.  We link these data to IRS tax records and administrative program data on the Supplemental Nutrition Assistance Program (SNAP), public and subsidized housing benefits, Supplemental Security Income (SSI), and Old Age, Survivors, and Disability Insurance (OASDI). We find that more than 90% of the 3.6 million non-homeless households with survey-reported cash income below $2/person/day are misclassified once we account for in-kind transfers, errors in earnings reports, errors in transfer reports, and the ownership of substantial assets. Several of the largest misclassified groups appear to be at least middle class based on material hardship, housing characteristics, tax data, and other variables. More than two-thirds of all misclassified households are initially categorized as extreme poor due to errors in cash reports of earnings, asset income, and retirement income. Of the households remaining in extreme poverty, 90% consist of a single individual. An implication of the low recent level of extreme poverty is that it cannot have risen substantially over time or due to welfare reform.