Economics

My Brother's Keeper? The Association between Having Siblings in Poor Health and Wealth Accumulation

My Brother's Keeper? The Association between Having Siblings in Poor Health and Wealth Accumulation
Journal of Family Issues, February, Volume 35(3), pp.358-383.

Heflin, C. and N. Chiteji
02/01/2014

When confronted with the economic costs of addressing a serious health problem, many American households do not possess the ability to deal with the crises on their own and may turn to family members for help. Using longitudinal data from the Panel Study of Income Dynamics, we examine if the level of wealth held by individuals is related to the health problems of their siblings. We find evidence that having a sibling who has experienced a health problem decreases the amount of wealth that some families have. The research has implications for the existing literatures on altruism and kin networks, as it sheds some light on the nature of altruism that prevails in U.S. families and on how kinship networks matter. Because of its focus on the consequences of health problems, the research also has implications for public policy discussions about the health care system and social insurance more generally.

The Price of Liquor is Too Damn High: State Facilitated Collusion and the Implications for Taxes

The Price of Liquor is Too Damn High: State Facilitated Collusion and the Implications for Taxes

Rao, Nirupama S. (with Chris Conlon)
12/02/2013

Alcohol markets are subject to both heavy regulation as well as excise taxes at the federal and state level. We examine the impact of particular state regulations on the structure of the alcohol market. We show that post and hold and meet but not beat pricing regulations at the wholesale level eliminate competitive incentives among whole-sellers and minimum retail markup rules at the retailer level e ectively allow whole-sellers to set retail price floors. Our model suggests that without any competitive incentives at the wholesale level, firms will set prices as if they were a single monopolist. Wholesalers will tend to mark up premium brands relative to call or well products. Regression results indicate that states featuring post and hold regulations consume 4% to 10% less alcohol than other states, suggesting that the regulations may over-restrict quantity. Tabulations suggest that premium products comprise a smaller share of consumption in post and hold states. This output gap due to collusive pricing leads any taxes levied on the liquor market to entail greater deadweight loss relative to a competitive wholesale market. We conduct an empirical analysis, where instead of providing wholesalers with market power, the state increases taxes to keep the overall level of alcohol consumption fixed. We also compute the deadweight loss of increasing taxation under both the existing scheme, and one with a competitive wholesale market. We find that the state of Connecticut could substantially increase taxes and tax revenues without affecting aggregate quantities if it repealed post and hold. Back of the envelope estimates suggest that Connecticut is forgoing over $300M in potential revenue from alcohol taxes in a competitive wholesale market.

Race and neighborhoods in the 21st century: What does segregation mean today?

Race and neighborhoods in the 21st century: What does segregation mean today?
Regional Science and Urban Economics (2013), http://dx.doi.org/10.1016/j.regsciurbeco.2013.09.006

De la Roca, Jorge, Ingrid Gould Ellen and Katherine M. O'Regan.
09/14/2013

Noting the decline in segregation between blacks and whites over the past several decades, some recent work argues that racial segregation is no longer a concern in the 21st century. In response, this paper revisits some of the concerns that John Quigley raised about racial segregation and neighborhoods to assess their relevance today. We note that while segregation levels between blacks and whites have certainly declined, they remain quite high; Hispanic and Asian segregation have meanwhile remained unchanged. Further, our analysis shows that the neighborhood environments of minorities continue to be highly unequal to those enjoyed by whites. Blacks and Hispanics continue to live among more disadvantaged neighbors, to have access to lower performing schools, and to be exposed to more violent crime. Further, these differences are amplified in more segregated metropolitan areas.

Economics, First Edition.

Economics, First Edition.
McGraw-Hill/Irwin.

Karlan, Dean and Jonathan Morduch
09/06/2013

Built from the ground up to focus on what matters to students in today’s high-tech, globalized world, Dean Karlan and Jonathan Morduch’s Economics represents a new generation of products, optimized for digital delivery and available with the best-in-class adaptive study resources in McGraw-Hill’s LearnSmart Advantage Suite. Engagement with real-world problems is built into the very fabric of the learning materials as students are encouraged to think about economics in efficient, innovative, and meaningful ways.

Drawing on the authors’ experiences as academic economists, teachers, and policy advisors, a familiar curriculum is combined with material from new research and applied areas such as finance, behavioral economics, and the political economy, to share with students how what they’re learning really matters. This modern approach is organized around learning objectives and matched with sound assessment tools aimed at enhancing students’ analytical and critical thinking competencies. Students and faculty will find content that breaks down barriers between what goes on in the classroom and what is going on in our nation and broader world.

By teaching the right questions to ask, Karlan and Morduch provide readers with a method for working through decisions they’ll face in life and ultimately show that economics is the common thread that enables us to understand, analyze, and solve problems in our local communities and around the world.

Shifting the Burden: Examining the Undertaxation of Some of the Most Valuable Properties in New York City

Shifting the Burden: Examining the Undertaxation of Some of the Most Valuable Properties in New York City
Furman Center Policy Brief; July 2013

The Furman Center for Real Estate and Urban Policy
07/02/2013

Some of New York City’s most valuable properties in its highest-cost neighborhoods are significantly and persistently undervalued, according to Shifting the Burden. The report identifies 50 individual co-ops in 46 buildings that were sold in 2012 for more than the New York City Department of Finance’s estimate of the market value of the entire building. This undervaluation has significant consequences for the distribution of tax burdens in New York City.

The Role of Neighborhood Characteristics in Mortgage Default Risk: Evidence from New York City

The Role of Neighborhood Characteristics in Mortgage Default Risk: Evidence from New York City
Journal of Housing Economics 22(2), June 2013

Sewin Chan, Michael Gedal, Vicki Been & Andrew Haughwout
06/01/2013

Using a rich database of non-prime mortgages from New York City, we find that census tract level neighborhood characteristics are important predictors of default behavior, even after controlling for an extensive set of controls for loan and borrower characteristics. First, default rates increase with the rate of foreclosure notices and the number of lender-owned properties (REOs) in the tract. Second, default rates on home purchase mortgages are higher in census tracts with larger shares of black residents, regardless of the borrower’s own race. We explore possible explanations for this second finding and conclude that it likely reflects differential treatment of black neighborhoods by the mortgage industry in ways that are unobserved in our data.

A Trapped-Factors Model of Innovation

A Trapped-Factors Model of Innovation
Forthcoming, American Economic Review, May 2013.

Paul Romer, Nicholas Bloom, Stephen J. Terry, and John Van Reenen
05/01/2013

When will reducing trade barriers against a low wage country cause innovation to increase in high wage regions like the US or EU? We develop a model where factors of production have costs of adjustment and so are partially “trapped” in producing old goods. Trade liberalization with a low wage country reduces the profitability of old goods and so the opportunity cost of innovating falls. Interestingly, the “China shock” is more likely to induce innovation than liberalization with high wage countries. These implications are consistent with a range of recent empirical evidence on the impact of China and offers a new mechanism for positive welfare effects of trade liberalization over and above the standard benefits of specialization and market expansion. Calibrations of our model to the recent experience of the US with China suggests that there will be faster long-run growth through innovation in the US and that, in the short run, this is magnified by the trapped factor effect.

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

Do Small Schools Improve Performance in Large, Urban Districts? Casual 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.

Pages

Subscribe to Economics