Economics

Do Small Schools Improve Performance in Large, Urban Districts? Causal Evidence from New York City

Do Small Schools Improve Performance in Large, Urban Districts? Causal Evidence from New York City
Journal of Urban Economics, 77: 27-40

Schwartz, A. E., Stiefel, L., & Wiswall, M.
04/10/2013

We evaluate the effectiveness of small high school reform in the country's largest school district, New York City. Using a rich administrative datasest for multiple cohorts of students and distance between student residence and school to instrument for endogenous school selection, we find substantial heterogeneity in school effects: newly created small schools have positive effects of graduation and some other educational outcomes while older small schools do not. Importantly, we show that ignoring this source of treatment effect heterogeneity by assuming a common small school effect yields a misleading zero effect of small school attendance.

State Unemployment Insurance Trust Solvency and Benefit Generosity.

State Unemployment Insurance Trust Solvency and Benefit Generosity.
Journal of Policy Analysis and Management 32(3): 536-53.

Smith, Daniel L. and Jeffrey B. Wenger.
01/01/2013

This paper employs panel estimators with data on the 50 American states for the years 1963 to 2006 to test the relationship between Unemployment Insurance (UI) trust fund solvency and UI benefit generosity. We find that both average and maximum weekly UI benefit amounts, as ratios to the average weekly wage, are higher in states and in years with more highly solvent trust funds. This result holds after controlling for state-level unemployment rate, Gross Domestic Product (GDP), population growth, legislative political ideology, partisan control of the executive and legislative branches, and gubernatorial election year across multiple specifications, including fixed-effects and dynamic panel estimators. We propose a theory of moderate coupling as the causal mechanism, whereby UI program benefits and financing are directly related but are not as tightly linked as in other social insurance programs, such as Medicaid. The findings have important policy implications for the funding of states’ UI systems. As a consequence of moderate coupling, the countercyclicality of the UI program is dampened. 

What Can We Learn About the Low Income Housing Tax Credit By Examining the Tenants?

What Can We Learn About the Low Income Housing Tax Credit By Examining the Tenants?
Housing Policy Debate.

Horn, Keren and Katherine O'Regan
01/01/2013

Using tenant-level data from 18 states that represent almost 40% of all Low-Income Housing Tax Credit units, this article examines tenant incomes, rental assistance, and rent burdens to shed light on key questions about our largest federal supply-side affordable housing program. Specifically, what are the incomes of the tenants, and does this program reach those with extremely low incomes? What rent burdens are experienced, and is economic diversity within developments achieved? We find that approximately 45% of tenants have extremely low incomes, and the overwhelming majority of such tenants also receive some form of rental assistance. Rent burdens are lower than that for renters with similar incomes nationally but generally higher than that presumed for housing programs of the U.S. Department of Housing and Urban Development. Rent burdens vary greatly by income level and are lowered by the sizable share of owners who charge below federal maximum rents. Finally, we find evidence of both economically diverse developments and those with concentrations of households with extremely low incomes.

Banking The World

Banking The World
The MIT Press

(eds.) Cull, Robert, Asli Demirgüç-Kunt and Jonathan Morduch
12/01/2012

About 2.5 billion adults, just over half the world’s adult population, lack bank accounts. If we are to realize the goal of extending banking and other financial services to this vast “unbanked” population, we need to consider not only such product innovations as microfinance and mobile banking but also issues of data accuracy, impact assessment, risk mitigation, technology adaptation, financial literacy, and local context. In Banking the World, experts take up these topics, reporting on new research that will guide both policy makers and scholars in a broader push to extend financial markets.

The contributors consider such topics as the complexity of surveying people about their use of financial services; evidence of the impact of financial services on income; the occasional negative effects of financial services on poor households, including disincentives to work and overindebtedness; and tools for improving access such as nontraditional credit scores, financial incentives for banking, and identification technologies that can dramatically reduce loan default rates.

Low Cognitive Ability and Poor Skill with Numbers May Prevent Many from Enrolling in Medicare Supplemental Coverage

Low Cognitive Ability and Poor Skill with Numbers May Prevent Many from Enrolling in Medicare Supplemental Coverage
Health Affairs. 2012; 31(8): 1847-1854.

Sewin Chan & Brian Elbel
08/01/2012

Because traditional Medicare leaves substantial gaps in coverage, many people obtain supplemental coverage to limit their exposure to out-of-pocket costs. However, some Medicare beneficiaries may not be well equipped to navigate the complex supplemental coverage landscape successfully because of their lower cognitive ability or numeracy—that is, the ability to work with numbers. We found that people in the lower third of the cognitive ability and numeracy distributions were at least eleven percentage points less likely than those in the upper third to enroll in a supplemental Medicare insurance plan. This result means that many Medicare beneficiaries do not have the financial protections and other benefits that would be available to them if they were enrolled in a supplemental insurance plan. Our findings suggest that policy makers may want to consider alternatives tailored to these high-need groups, such as enhanced education and enrollment programs, simpler sets of plan choices, or even some type of automatic enrollment with an option to decline coverage.

From Endeavor to Achievement and Back Again: Government's Greatest Hits in Peril

From Endeavor to Achievement and Back Again: Government's Greatest Hits in Peril
In To Promote the General Welfare: The Case for Big Government. Steven Conn, Ed., Oxford Univeristy Press

Paul C. Light
07/01/2012

"These 10 articles from leading scholars address federal government activism in such areas as health, education, transportation, and the arts. In some areas, federal involvement has been direct; for example, while school public systems are governed locally, Washington provides about 10% of k–12 funding. Similarly, antipoverty programs, such as the New Deal’s Social Security Act and Aid for Dependent Children, have played a major role in reducing the poverty rate from around 40% in 1900 to 11.2% in 1974. At other times, Washington has exerted influence more subtly, through regulations and research. Examples include the 1933 Glass-Steagall Act, which mandated the separation of investment and commercial banking and the WWII-era research that yielded compounds to prevent and cure malaria, syphilis, and tuberculosis. Further, as public policy scholar Paul C. Light points out in a fascinating concluding piece, more than two-thirds of leading governmental initiatives have been supported by both Democratic and Republican administrations. However, Light adds, the massive tax cut in 2001 “continue[s] to constrain federal investment in problem solving.” The scholars brought together by Ohio State historian Conn (History’s Shadow) persuasively demonstrate how the growth of “big government” throughout the 20th century has benefited ordinary Americans so comprehensively and unobtrusively that they have often taken it for granted."

Publishers Weekly

http://www.publishersweekly.com/978-0-19-985855-2

Behavioral Foundations of Microcredit: Experimental and Survey Evidence from Rural India

Behavioral Foundations of Microcredit: Experimental and Survey Evidence from Rural India
American Economic Review 102 (2), April 2012: 1118-1139.

Bauer, Michal; Julie Chytilová; and Jonathan Morduch
04/01/2012

We use experimental measures of time discounting and risk aversion for villagers in south India to highlight behavioral features of microcredit, a financial tool designed to reduce poverty and fix credit market imperfections. The evidence suggests that microcredit contracts may do more than reduce moral hazard and adverse selection by imposing new forms of discipline on borrowers. We find that, conditional on borrowing from any source, women with present-biased preferences are more likely than others to borrow through microcredit institutions. Another particular contribution of microcredit may thus be to provide helpful structure for borrowers seeking self-discipline.

The Fiscal Challenge of an Aging Population in the U.S.

The Fiscal Challenge of an Aging Population in the U.S.
In The Oxford Handbook of Work and Aging, edited by Jerry W. Hedge and Walter C. Borman. Oxford University Press, 2012.

Sewin Chan
03/01/2012

This chapter examines the fiscal challenge posed by the aging of the U.S. population. We summarize the likely future of U.S. demographics, focusing on the evolution of the dependency ratio. We describe the main U.S. government programs related to aging and assess their fiscal positions. Forecasts for the unfunded liabilities in these programs exceed $40 trillion. We provide a review of economic theory useful for understanding the likely economic impact of budget deficits. We evaluate the fiscal adjustment that is likely to be needed given the 2009 status of the U.S. fiscal position and predicted demographic changes: it is likely to be approximately 8% of GDP, which, while large, is an adjustment that has been managed by many countries in the past. Finally, we provide a brief survey of potential policies to address the fiscal challenge of aging, and of economic research evaluating such policies.

Do interest rates matter? Credit demand in the Dhaka Slums

Do interest rates matter? Credit demand in the Dhaka Slums
Journal of Development Economics, 97(2): 437-449

Dehejia, Rajeev; Heather Montgomery and Jonathan Morduch
03/01/2012

“Best practice” in microfinance holds that interest rates should be set at profit-making levels, based on the belief that even poor customers favor access to finance over low fees.  Despite this core belief, little direct evidence exists on the price elasticity of credit demand in poor communities.  We examine increases in the interest rate on microfinance loans in the slums of Dhaka, Bangladesh.  Using unanticipated between-branch variation in prices, we estimate interest elasticities from -0.73 to -1.04, with our preferred estimate being at the upper end of this range. Interest income earned from most borrowers fell, but interest income earned from the largest customers increased, generating overall profitability at the branch level. 

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