Sunday, May 29, 2005

The Search for 100 Million Missing Women

¿Para que sirve hacer tantas regresiones? Para distinguir entre el efecto de la
misoginia y la hepatitis B...

The Search for 100 Million Missing Women
An economics detective story.
By Stephen J. Dubner and Steven D. Levitt

"(...)In an essay in the New York Review of Books, Amartya Sen claimed that
there were some 100 million "missing women" in Asia. While the ratio of men to
women in the West was nearly even, in countries like China, India, and
Pakistan, there were far more men than women. Sen charged these cultures with
gravely mistreating their young girls—perhaps by starving their daughters at
the expense of their sons or not taking the girls to doctors when they should
have. Although Sen didn't say so, there were other sinister possibilities. Were
the missing women a result of selective abortions? Female infanticide? A forced
export of prostitutes?

Sen had used the measurement tools of economics to uncover a jarring mystery and
to accuse a culprit—misogyny. But now another economist has reached a
startlingly different conclusion.

Emily Oster is an economics graduate student at Harvard who started running
regression analyses when she was 10 (both her parents are economists) and is
particularly interested in studying disease. She first learned of the "missing
women" theory while she was an undergraduate. Then one day last summer, while
doing some poolside reading in Las Vegas—the book was Baruch Blumberg's
Hepatitis B: The Hunt for a Killer Virus—she discovered a strange fact. In a
series of small-scale medical studies in Greece, Greenland, and elsewhere,
researchers had found that a pregnant woman with hepatitis B is far more likely
to have a baby boy than a baby girl. It wasn't clear why—it may be that a
female fetus is more likely to be miscarried when exposed to the virus.

Oster was suitably intrigued. She set out first to see if she could use data to
confirm Blumberg's thesis. A vaccine for hepatitis B, she learned, had been
available since the late 1970s. She found good data on a U.S. government
vaccination program in Alaska. Before the vaccinations began, Alaskan natives
had a historically high incidence of hepatitis B as well as a high birth ratio
of boys to girls. White Alaskans, meanwhile, had a low incidence of hepatitis B
and gave birth to the standard ratio of boys to girls. But after a universal
vaccination program was carried out in Alaska, the Native Alaskans' boy-girl
ratio fell almost immediately to the normal range, while the white Alaskans'
ratio was unchanged. A vaccination program in Taiwan revealed similar results."

Thursday, May 26, 2005

Rent seeking in academia

The Farm-Subsidy Model of Financing Academia

(...) A study by John M. de Figueiredo of the University of California, Los Angeles and Brian S. Silverman of the University of Toronto, which will soon be published in The Journal of Law and Economics, finds that universities receive a high return on their lobbying dollars. The researchers related the amount each university received in earmarks to its lobbying expenditures from 1997 to 1999, and other factors.

(...) Analyzing differences in lobbying expenditures stemming from differences in overhead rates with a statistical technique called "instrumental variables," Professors de Figueiredo and Silverman found that a $1 increase in lobbying expenditures is associated with a $1.56 increase in earmarks for universities in districts that do not have a senator or congressman on the crucial Appropriations Committees, and more than a $4.50 gain in earmarks for universities with a representative on one of the Appropriations Committees.

Even among universities that do not lobby, those that have a congressman or senator on the Appropriations Committees tend to be awarded more earmarked funds.

A university's fortunes also tend to rise or fall when senators from its state join or exit the Appropriations Committee. For example, the year after Senator Lauch Faircloth of North Carolina, a member of the committee, was defeated by John Edwards, who did not become a member, earmarks to universities in North Carolina fell by half.

Unlike lobbying efforts and political factors, a university's academic standing, as measured by the National Academy of Science's ranking of departments, is not related to the amount of earmarked funds it receives.


Wednesday, May 25, 2005

The anti-achievement ethic

Este es el párrafo inicial de un nuevo paper teórico. Envíense un fax a
ustedes mismos si alguna vez han incurrido en tal error dentro o fuera del

The Economics of 'Acting White'

"Of all the obstacles to success that inner city youth face, the most
surprising—and discouraging—may be those erected by their own peers... Many
teenagers have come to equate black identity with alienation and
indi.erence. "I use to go home and cry," says Tachelle Ross, 18, a senior at
Oberlin High School in Ohio. "They called me white. I don’t know why. ‘I’d
say, I am as black as you are." Promising black students are ridiculed for
speaking standard English, showing an interest in ballet or theater, having
white friends, or joining activities other than sports...

Honor students may be rebuked for even showing up for class on time. The
pattern of abuse is
a distinctive variation on the nerd bashing that almost all bright,
ambitious students—no matter the color—face at some point in their lives.
The anti-achievement ethic championed by some black youngsters declares
formal education useless; those who disagree and study hard face isolation,
scorn and violence. While educators have recognized the existence of an
anti-achievement culture for at least a decade, it has only recently emerged
as a dominant theme among the troubles facing urban schools...

Social success depends partly on academic failure; safety and acceptance lie
in rejecting the
traditional paths to self-improvement."

–— "The Hidden Hurdle," Time, March 16, 1992

Optimism and Economic Choice

Este paper explota un excelente proxy de las expectativas de la gente: su
expectativa de vida reportada en encuestas.

Optimism and Economic Choice
by Manju Puri, David Robinson - #11361 (AP CF)
This paper presents some of the first large-scale survey evidence linking
optimism to major economic choices. We create a novel measure of optimism
using the Survey of Consumer Finance by comparing a person's self-reported
life expectancy to that implied by statistical tables. Optimists are more
likely to believe that future economic conditions will improve.
Self-employed respondents are more optimistic than regular wage earners. In
general, more optimistic people work harder and anticipate longer
age-adjusted work careers. They are more likely to remarry, conditional on
divorce. In addition, they tilt their investment portfolios more toward
individual stocks.

Tuesday, May 24, 2005

How to order food in a restaurant

When you're out to eat with friends and family, it can be challenging to decide what to order off the menu. There are often too many choices on the menu, everything sounds good, nothing sounds good, you're unfamiliar with a particular type of cuisine, you'd like have what that woman over there is having but you don't know what that is, etc. etc.

Luckily, a group of authors has recently released a series of pop science books focused on solving this particular problem. Here are some lessons on ordering food from those books:

Blink by Malcolm Gladwell
Glance quickly at the menu and order whatever catches your eye first. Spend no more than 2-3 seconds deciding or the quality of your choice (and your meal) will decline.

Freakonomics by Steven Levitt and Stephen J. Dubner
The key to ordering a good meal in a restaurant is understanding the economic incentives involved. Ask the server what they recommend and order something else...they are probably trying to get you to order something with a high profit margin or a dish that the restaurant needs to get rid of before the chicken goes bad or something. Never order the second least expensive bottle of wine; it's typically the one with the highest mark-up on the list (i.e. the worst deal).

The Paradox of Choice by Barry Schwartz
Take the menu and rip it into 4 or 5 pieces. Order from only one of the pieces, ignoring the choices on the rest of the menu. You will be happier with your meal.

The Wisdom of Crowds by James Surowiecki
Poll the other patrons at the restaurant about what they're having and order the most popular choices for yourself.

Everything Bad is Good for You by Steven Johnson
Order anything made with lots of butter, sugar, etc. Avoid salad or anything organic. A meal of all desserts may be appropriate. Or see if you can get the chef to make you a special dish like foie gras and bacon covered with butterscotch and hot fudge. Ideally, you will have brought a Super Sized McDonald's Double Quarter Pounder with Cheese Meal into the restaurant with you. Smoke and drink liberally.


Observing Unobservables

"Observing Unobservables: Identifying Information Asymmetries
with a Consumer Credit Field Experiment"
Princeton University, Yale University, Economic Growth Center
Federal Reserve Bank of New York

Information asymmetries are important in theory but difficult to
identify in practice. We estimate the empirical importance of
adverse selection and moral hazard in a consumer credit market
using a new field experiment methodology. We randomized 58,000
direct mail offers issued by a major South African lender along
three dimensions: 1) the initial "offer interest rate" appearing
on direct mail solicitations; 2) a "contract interest rate"
equal to or less than the offer interest rate and revealed to
the over 4,000 borrowers who agreed to the initial offer rate;
and 3) a dynamic repayment incentive that extends preferential
pricing on future loans to borrowers who remain in good
standing. These three randomizations, combined with complete
knowledge of the Lender's information set, permit identification
of specific types of private information problems. Specifically,
our setup distinguishes adverse selection from moral hazard
effects on repayment, and thereby generates unique evidence on
the existence and magnitudes of specific credit market failures.
We find evidence of both adverse selection (among women) and
moral hazard (predominantly among men), and the findings suggest
that about 20% of default is due to asymmetric information
problems. This helps explain the prevalence of credit
constraints even in a market that specializes in financing
high-risk borrowers at very high rates.

JEL Classification: C9, D8, G2, G3, O1

Saturday, May 21, 2005

Pooling Equilibrium and Open Secrets

Esto es lo que los economistas llaman "pooling equilibrium":
"Most organizations who hire people right out of college are only aware of
the average value of 22 year olds, which is not that high...
The most productive young people will always be undervalued by large
organizations, because the young have no performance to measure yet, and any
error in guessing their ability will tend toward the mean."

Pero una de las implicaciones es sopresiva:

"His point is that if you are exceptional and young, you should start your
own business. That way, you will get more than an average reward.
Learning comes from taking on challenges. Entrepreneurship is a constant,
in-your-face challenge. Relative to that, college is a stroll in the park. "


¿Que pasaria si todo mundo compartiera sus secretos en internet? Esto:

Wednesday, May 18, 2005

The Mysteries of Chet

¿Cuál creen que sea el equivalente en México de los "chets"?
"The Mysteries of Chet: I have known many investment bankers in my day. Many of these men are stand-up guys, fun to be with, always up for smoking a few bowls and playing golf. Others are asshole blowhards....

All of them, however, have the same basic character type, which I will call 'Chet'. Chet is a hail-fellow-well-met sort, cracking jokes all the time (some of most of which may be 'politically incorrect', because he doesn't care about things like that). Chet is tall, probably tan, and has big white teeth like a mouthful of chiclets.... Chet is a member of country clubs, and has a thin wife, and two adorable kids, etc. etc. If you close your eyes and imagine a picture in a silver frame on an end table in an apartment on 84th and Park, then you know what Chet's kids look like (super cute!).

Finally, Chet has an incredibly high opinion of himself. He is confident to the point of arrogance, but friendly, outgoing. There is one thing Chet is not, ever, in my experience, and that is particularly bright. Really. Not an intellectual powerhouse, is where I'm going with this. Not, in all likelihood, able to perform complex mathematical operations. Given that this is so, why are the Chets paid so much?"

Brad DeLong responde:

"Part of the answer is that they are sitting at a nexus: a huge amount of money blows past Wall Street, and if you can sit in the right place with a large net, unbelievable quantities of money will be trapped by it.

A bigger part of this answer is that there are four relevant human capabilities here: the ability to master details, the ability to quickly grasp what the salient issues are and follow them through to their conclusion, the ability to work like a dog, and the ability to size up people--figure out quickly who will actually produce something useful and who will not, who will hang tough and who will easily bid more, who will soften if wooed and who will stay hard-nosed. Next to nobody has all four or even three of these capabilities in world-class measure. Fewer people than you think have even two. And for someone who has one of the other three--mastery of detail or skill at analysis or the ability to work like a dog for ungodly periods of time--mastery of Chet-hood is a very valuable and lucrative skill."

Monday, May 16, 2005

Is the New Immigration Really So Bad?

New evidence on Immigration. George Borjas is probably not very happy about

Is the New Immigration Really So Bad?
David Card, Department of Economics - UC Berkeley
January 2005
This paper reviews the recent evidence on U.S. immigration, focusing on two
key questions: (1) Does immigration reduce the labor market opportunities of
less-skilled natives? (2) Have immigrants who arrived after the 1965
Immigration Reform Act successfully assimilated?

Looking across major cities, differential immigrant inflows are strongly
correlated with the relative supply of high school dropouts. Nevertheless,
data from the 2000 Census shows that relative wages of native dropouts are
uncorrelated with the relative supply of less-educated workers, as they were
in earlier years.

At the aggregate level, the wage gap between dropouts and high school
graduates has remained nearly constant since 1980, despite supply pressure
from immigration and the rise of other education-related wage gaps.

Overall, evidence that immigrants have harmed the opportunities of less
educated natives is scant. On the question of assimilation, the success of
the U.S.-born children of immigrants is a key yardstick. By this metric,
post-1965 immigrants are doing reasonably well: second generation sons and
daughters have higher education and wages than the children of natives. Even
children of the least educated immigrant origin groups have closed most of
the education gap with the children of natives.

Sunday, May 15, 2005

Political Institutions and the PMP in Mexico

Abstract: This paper uses a transaction-costs framework to link the policymaking process (PMP) and the outer features of public policies in Mexico. It shows how a PMP centralized around the presidency fashioned nationalist policies that were stable, adaptable, coordinated, and private-regarding for the urban-based corporatist pillars of the regime. When growth faltered in the early 80s, however, this PMP was no longer able to adapt to economic volatility, even if it remained dominant in an increasingly turbulent polity.

We explain how unified government and the corporatist control of the economy made a constitutionally weak president in fact a very strong policymaker, even at the cost of being unable to enact reforms with short-term costs for corporatist groups. We also explain why democratization and economic liberalization in the 1990s is constructing a less centralized and more open PMP that benefits larger shares of the population. However, as the separation of powers of the 1917 constitution comes alive, policymaking is increasingly wedded to the status quo. On the one hand, divided government preserves a macroeconomic framework consistent with an open economy (e.g., fiscally sound policies and a floating exchange rate). On the other hand, checks and balances are permitting old and new parties and interest groups to veto second generation reforms in tax policy, labor regulation, and energy markets.

(from the paper conclusion)
The new PMP increases the transaction costs of negotiating structural reforms. The activation of the separation of powers (that unified government and corporatist representation concealed) with numerous checks and balances among the branches of government fragments political power. By fragmenting state power, old as well as new parties (and interest-groups) can veto efforts to denationalize energy sectors, to eliminate tax loopholes, and to deregulate labor markets.

Poorly defined property rights over the effects of reforms may also help to explain why parties cannot agree, for example, to amend the constitution to permit private sector investment in the energy sectors. Political bargains are more difficult to effect because it is hard to translate future economic payoffs into present value political compensation. A hypothetical contract, where reforms are agreed upon in exchange for some political and economical compensation, requires credible commitments, and equally important, they need to be enforceable. In private bargains, it is easy to rely on explicit contracts and third party enforcement. But in matters of public policy, such explicit contracts are rare, and the likely enforcer, the electorate, faces collective action problems and remains ambivalent about further structural reforms.

Non-consecutive reelection also undermines the policy expertise of legislators, even though divided government makes Congress into the principal lawmaking branch of government. Term limits also shortens time horizons of deputies and Senators, thus limiting the political bargains that can credibly be made. It is also not clear how an increasingly independent Supreme Court will interpret the constitution, an unknown of strategic importance because public control over energy resources is constitutionally protected in Mexico. In the PRI era, centralized policymaking allowed for some political bargains, but they also faced limits and trade-offs, which often turned into unsustainable policies. It is possible that as partisan identities and policy choices become clearer, key players will be able to credibly commit to reforming the economy.

Saturday, May 14, 2005

Shameless self-promotion

El día 9 y 10 de mayo, La Jornada tuvo a bien citarme en un par de artículos
sobre financiamiento y gasto en campañas electorales en México. El asunto
sería trivial de no ser porque son mis primeras menciones en un medio
nacional. Es justicia divina, pues fui ávido lector de La Jornada entre 1988
y 1996.

La propaganda política en medios electrónicos, más cara que en EU

Medios electrónicos trivializan la política y reducen ofertas electorales a
30 segundos

Living Wages

Una de tantas cosas que supuestamente se aprenden en introducción a la economía es que los controles de precios (o salarios) generan distorsiones en la economía.  En el caso del mercado laboral, estas distorsiones pueden significar desempleo y/o discriminación.  "¡Mentiras tecnocráticas!", dicen los estudiantes de 1er año...  Aquí les va cierta evidencia (aunque también hay papers que encuentran lo contrario, conste).

"The Effects of Living Wage Laws: Evidence from Failed and Derailed Living Wage Campaigns"
University of Wisconsin - Milwaukee
Public Policy Institute of California, National Bureau of Economic Research (NBER)
Paper ID: IZA Discussion Paper No. 1566; Public Policy Institute
of California Working Paper No. 2004-11

Living wage campaigns have succeeded in about 100 jurisdictions in the United States but have also been unsuccessful in numerous cities. These unsuccessful campaigns provide a better control group or counterfactual for estimating the effects of living wage laws than the broader set of all cities without a law, and also permit the separate estimation of the effects of living wage laws and living wage campaigns.

We find that living wage laws raise wages of low-wage workers but reduce employment among the least-skilled, especially when the laws cover business assistance recipients or are accompanied by similar laws in nearby cities.

Wednesday, May 11, 2005

Judiciary Lobbying

Judicial Lobbying: The Politics of Labor Law Constitutional Interpretation
Matias Iaryczower, Pablo Spiller, Mariano Tommasi - NBER #11317

This paper links the theory of interest groups influence over the
legislature with that of congressional control over the judiciary.
The resulting framework reconciles the theoretical literature of
lobbying with the negative available evidence on the impact of
lobbying over legislative outcomes, and sheds light to the
determinants of lobbying in separation-of-powers systems. We provide
conditions for judicial decisions to be sensitive to legislative
lobbying, and find that lobbying falls the more divided the
legislature is on the relevant issues. We apply this framework to
analyze supreme court labor decisions in Argentina, and find results
consistent with the predictions of the theory.

Wednesday, May 04, 2005

Coase, Meade, and Bees

I covered the Coase theorem in class today and how transaction costs turned out to be an idea worth three nobel prizes (Coase, Buchanan and North).

"Ever since Coase published "The Problem of Social Cost," economists unconvinced by his analysis have argued that the Coase Theorem is merely a theoretical curiousity, of little or no practical importance in a world where transaction costs are rarely zero. One famous example was in an article by James Meade (who later received a Nobel prize for his work on the economics of international trade).

Meade offered, as an example of the sort of externality problem for which Coase's approach offered no practical solution, the externalities associated with honey bees. Bees graze on the flowers of various crops, so a farmer who grows crops that produce nectar benefits the beekeepers in the area. The farmer receives none of the benefit himself, so he has an inefficiently low incentive to grow such crops. Since bees cannot be convinced to respect property rights or keep contracts, there is, Meade argued, no practical way to apply Coase's approach. We must either subsidize farmers who grow nectar rich crops (a negative Pigouvian tax) or accept inefficiency in the joint production of crops and honey.

It turned out that Meade was wrong. In two later articles, supporters of Coase demonstrated that contracts between beekeepers and farmers had been common practice in the industry since early in this century. When the crops were producing nectar and did not need pollenization, beekeepers paid farmers for permission to put their hives in the farmers' fields. When the crops were producing little nectar but needed pollenization (which increases yields), farmers paid beekeepers. Bees may not respect property rights but they are, like people, lazy, and prefer to forage as close to the hive as possible.

The fact that a Coasian approach solves that particular externality problem does not imply that it will solve all such problems. But the observation that an economist as distinguished as Meade assumed Coase's approach was of no practical significance in a context where it was actually standard practice suggests that the range of problems to which the Coasian solution is relevant may be much greater than many would at first guess."

Monday, May 02, 2005

Campaign Finance: Public or Private?

Money in politics is a hotly debated issue in almost every democratic regime. The debate, however, between public vs. private funded political campaigns is not settled. Most countries actually subsidize campaigns somewhat in line with their degree of state intervention in the economy. But I am not aware of a systematic cross country analysis of this issue. And for the Mexican case, most pundits immediately assume that public funding per se triumphs over private contributions.

My current take is that large fixed costs may justify subsidizing campaigns at the early stages of a democratic transition--although explaining why a regime would find that beneficial is also puzzling. However, subsidizing campaigns creates undesirable consequences and distorts the incentives of would-be politicians, political parties, etc. On the other hand, having only privately funded campaigns also has its problems, as it may over-represent wealthy special interests.

The argument for full public funding (that private money is "obscure") is odd: Following the same logic, the government should own most enterprises to get revenues and finance public spending. But most people would agree that it is more efficient to let private parties run their businesses and then just tax them.

Assume a country spends 1 billion in political party subsidies. Is this the best use of public money? How about allowing private contributions and then spending, say half a billion in monitoring contributions and campaign spending, or in susbsidizing only certain campaigns? An intermediate and interesting proposal would be: spend more on monitoring money flows, and only use public money to "match" the fund raising of candidates.