Review of Economics and Statistics (REStat)

The Importance of Student-Teacher Matching: A Multidimensional Value-Added Approach Abstract. We propose a framework for value-added models that flexibly characterizes heterogeneous teacher productivity based on multidimensional student characteristics. We show that teacher effectiveness heavily depends on the specific attributes of their students. For example, the difference in value-added between well-matched and poorlymatched students for the average teacher is approximately 0.1 standard deviations in test scores. Notably, these matching effects are particularly pronounced among lowachieving students. In language arts, the standard deviation in teacher value-added is one-third larger for low-achieving students compared to high-achieving students.

Teachers aren’t simply good or bad. Impact depends on match, with the biggest effect for struggling students. Just Accepted new paper by Tom Ahn, Esteban M. Aucejo, and Jonathan James zurl.co/LRbOo

The Domestic Political Economy of China’s Foreign Aid Abstract. I study how domestic political considerations influence the foreign policy choices of autocratic regimes, by analyzing China’s foreign aid. First, using contractor-level data, I document how the regime uses foreign aid projects to help maintain domestic stability: aid projects are awarded to state-owned firms in Chinese prefectures hit by social unrest, increasing employment and future political stability. Second, I find that this strategy to manage domestic unrest affects the global allocation of Chinese aid, since state-owned firms pursue projects in countries where they have prior connections.

China's strategy to maintain domestic social stability influences the global allocation of its foreign aid. Just Accepted new paper by Joris Mueller zurl.co/VaoW0

The Effect of Medicaid on Crime: Evidence from the Oregon Health Insurance Experiment Abstract. Those involved with the criminal justice system have disproportionately high rates of mental illness and substance-use disorders, prompting speculation that health insurance, by improving treatment of these conditions, could reduce crime. Using the 2008 Oregon Health Insurance Experiment, which randomly made some low-income adults eligible to apply for Medicaid, we find no statistically significant impact of Medicaid coverage on criminal charges or convictions. These null effects persist for high-risk subgroups, such as those with prior criminal cases and convictions or mental health conditions. In the full sample, our confidence intervals can rule out most quasi-experimental estimates of Medicaid’s crime-reducing impact.

Gaining Medicaid coverage via a lottery did not have a detectable impact on criminal justice involvement. Just Accepted new paper by Amy Finkelstein, Sarah Miller, and Katherine Baicker zurl.co/t4RaS

Limited Monotonicity and the Combined Compliers LATE Abstract. We consider endogenous binary treatment with multiple binary instruments. We propose a novel limited monotonicity (LiM) assumption that is generally weaker than alternative monotonicity assumptions in the literature. We define and identify (under LiM) the combined compliers local average treatment effect (CC-LATE), which is arguably a more policy-relevant parameter than the weighted average of LATEs identified by two-stage least squares (TSLS), and is identified under more general conditions. Estimating the CC-LATE is trivial, equivalent to running TSLS with one constructed instrument on a subsample. We use our CC-LATE to empirically assess how knowledge of HIV status influences protective behaviors.

A new way to estimate causal effects when using several IVs. Just Accepted new paper by Nadja van’t Hoff, Arthur Lewbel, and Giovanni Mellace zurl.co/XZvKK

Investor Origin and Deforestation: Evidence from Global Mining Sites Abstract. Does mining activity lead to deforestation? How does investor origin affect the environmental impacts of mining operations? We investigate these questions by estimating the causal impact of mineral price changes on deforestation near mining sites. Combining global mine propertylevel data with high-resolution satellite imagery on forest cover, we find a positive elasticity of deforestation to mineral price shocks. This elasticity is significantly lower when mine owners are from countries with higher income or better institutions, but it is not affected by host country characteristics. Evidence suggests that mine owners from higher-income countries induce different types of local economic activity.

Just Accepted new paper, “Investor Origin and Deforestation: Evidence from Global Mining Sites” by Victoria Wenxin Xie, Wei You, and Ran Goldblatt zurl.co/frXaO

Conscientiousness in the Workplace: Evidence from a Field Experiment in West Africa Abstract. Despite extensive evidence on the importance of non-cognitive skills for labor market outcomes, to what extent training can affect specific skills in adulthood remains an open question. We conducted a randomized controlled trial with low-skilled employed workers in Senegal where workers were randomly assigned to receive a training intervention designed to affect conscientiousness-related skills. We found that treated workers were significantly more likely to stay in their job, had higher earnings and better performance grades post intervention. Our findings suggest that non-cognitive skills can be affected later in the life cycle and targeted training can have substantial labor market returns.

Conscientiousness training boosted job retention and wages among low-skill workers in West Africa. Just Accepted new paper by M. Allemand, M. Kirchberger, S. Milusheva, C. Newman @carolnewman.bsky.social B. W. Roberts @bwroberts.bsky.social‬ and V. Thorne @vinceth.bsky.social zurl.co/qwbFI

The Long-Lived Cyclicality of the Labor Force Participation Rate Abstract. How cyclical is the U.S. labor force participation rate (LFPR)? We examine exogenous state-level business cycle shocks, finding that the LFPR is highly cyclical, but with significantly longer-lived responses than the unemployment rate. After a negative shock, the LFPR declines for about four years—substantially lagging unemployment—and only fully recovers after about eight years. Our main specifications use age-sex-adjusted LFPR, and we show that using unadjusted LFPR is problematic because local shocks spur changes in the population of high-LFPR age groups. Cyclicality varies across groups, with larger and longer-lived responses among men, younger workers, less-educated workers, and Black workers.

The labor force participation rate features long-lived cyclicality, lagging behind the unemployment rate. Just Accepted new paper by Tomaz Cajner, John Coglianese, and Joshua Montes zurl.co/tfnnI

Rules of Origins Relaxation and Regional Supply Chains: Evidence from Europe Abstract. We examine how Rules of Origin (RoO) and cumulation provisions in Free Trade Agreements shape imports and supply chains. Using a new RoO database and two policy changes, the Pan-European Cumulation System and the 2004 EU enlargement, we show that relaxing RoO increases intermediate imports from countries where cumulation restrictions were lifted. A 1% higher value requirement before liberalization raised such imports by 0.4–0.7%. Effects are stronger when preferential margins are higher, underscoring the joint role of RoO, cumulation provisions, and tariffs in shaping sourcing decisions.

Just Accepted new paper, “Rules of Origins Relaxation and Regional Supply Chains: Evidence from Europe” by Pamela Bombarda, Elisa Gamberoni, and Irene Iodice zurl.co/RRENR

In Sickness and in Health: Job Displacement and Health Spillovers in Couples Abstract. Using administrative labor market data matched to mortality statistics and patient records, we document that negative labor market shocks produce sizable health spillovers in couples. For every 100,000 displaced men, there are 1,100 additional deaths. Of those, 60% accrue to the displaced worker, but 40% are due to excess spousal mortality. We find a stunning gender asymmetry: while male job displacement generates persistent negative health effects, no such dire consequences are observed after a woman’s job loss. We explore several explanations for these patterns: risk sharing through spousal labor supply; earnings losses and public insurance; widowhood; regional mobility and gender roles in the family.

Mortality of displaced worker and his partner increases after male job loss, but not after female job loss. Just Accepted new paper by Christina Gathmann, Kristiina Huttunen, Laura Jernström @laurajernstrom.bsky.social Lauri Sääksvuori, and Robin Stitzing zurl.co/hxqhG

Information Provision and Search Frictions: Evidence from the Taxi Industry in Singapore Abstract. Search frictions and misallocation are common in decentralized transportation markets. Using novel trip-level data of taxis in Singapore, this paper examines the impactof real-time demand information at airport terminals on search frictions. The in-formation reduces taxi supply misallocation, increasing deadheading speed by 16.3%and decreasing deadheading time by 10.77%, benefiting both passengers and drivers.It raises daily earnings by $3.70 USD and adds 6.2 minutes of operational time perairport-trip taxi. Spatial spillovers are primarily observed among drivers in adjacentdistricts. Taxis from the Budget Terminal and drivers with fewer prior airport pickups benefit more from this information.

Real-time airport demand info lowers taxi deadheading, reduces misallocation, and improves driver welfare. Just Accepted new paper by Sumit Agarwal, Shih-fen Cheng, Jussi Keppo, Long Wang, and Yang Yang zurl.co/KTorb

The Lifesaving Impact of Electronic Medical Records for HIV Patients Abstract. This paper shows that replacing paper-based records with electronic medical records (EMRs) improves HIV patient retention and prevents AIDS deaths in the low-income country of Malawi. An event study of 106 HIV clinics shows a 28 percent reduction in annual deaths five years after EMR implementation, with the greatest impact on children. Improvements in health outcomes appear due to efficiency gains, rather than to changes in the medical care provided at visits. These efficiency gains allow clinics to better manage patient data, trace lapsed patients and return them into care, and adapt to higher patient volumes over time.

The switch from paper to electronic medical records prevented deaths among HIV patients in Malawian clinics. Just Accepted new paper by Laura Derksen @lauraderksen.bsky.social‬, Anita M. McGahan, and Leandro S. Pongeluppe zurl.co/7RJBQ

Maternal and Infant Health Inequality: New Evidence from Linked Administrative Data Abstract. We use linked administrative data on the universe of California births to provide novel evidence on economic inequality in infant and maternal health. Infants and mothers at the top of the income distribution have worse birth and morbidity outcomes than their lowest-income counterparts, but are nevertheless the least likely to die in the year following birth. Racial disparities swamp these income disparities, with no racial convergence in health outcomes as income rises. A comparison with Sweden shows that infant and maternal health is worse in California at virtually all income levels.

Just Accepted new paper, “Maternal and Infant Health Inequality: New Evidence from Linked Administrative Data” by Kate Kennedy-Moulton, Sarah Miller, Petra Persson, Maya Rossin-Slater, Laura R. Wherry, and Gloria Aldana. zurl.co/OqicE

Inertia, Market Power, and Adverse Selection in Health Insurance: Evidence from the ACA Exchanges Abstract. We study how inertia interacts with market power and adverse selection in health insurance. We incorporate inertia into a model of plan selection and price competition, and estimate it using data from the California ACA exchange. We estimate inertia costs equaling 26% of average premiums. Our simulations indicate that inertia exacerbates market power, but has minimal interaction with selection. Eliminating inertia reduces average premiums by 6.6%. Maintaining premium-linked subsidies or reducing consumer churn increases the impact of inertia by enhancing market power. Provider network attachment is an important impediment to plan switching, but substantial inertia remains after accounting for networks.

Just Accepted new paper, “Inertia, Market Power, and Adverse Selection in Health Insurance: Evidence from the ACA Exchanges” by Evan Saltzman, Ashley Swanson, and Daniel Polsky. zurl.co/CCaE8

Who Becomes a Successful Entrepreneur? The Role of Early Industry Exposure Abstract. We consider the role of parental influence on the industry choice of entrepreneurs and the success of their ventures. Almost 75% of male entrepreneurs start a firm in an industry that is the same or closely related to their father’s industry of employment. Ventures started by same-industry entrepreneurs have superior mean outcomes and higher propensity to be positive outliers. The patterns cannot be explained by parents helping out or by inherited intrinsic abilities. We argue that entrepreneurs appear to obtain industry knowledge through interacting with parents during upbringing, or “dinner table human capital”.

Entrepreneurs disproportionately start new ventures in the industries in which their fathers worked. Just Accepted new paper by Hans K. Hvide and Paul Oyer. zurl.co/EYRSe

When Should Public Programs Be Privately Administered? Theory and Evidence from the Paycheck Protection Program Abstract. When should private companies allocate public resources? In our model, delegation is attractive when delay is costly, the impact of funds is similar across firms, and government and private objectives are aligned. We use novel firm-level survey data to measure heterogeneity in the impact of the Paycheck Protection Program and to assess whether banks targeted loans to high-impact firms. Banks did target loans to their most valuable pre-existing customers. However, we find that treatment effect heterogeneity is moderate, suggesting that delegation was likely superior from the government’s perspective to delaying loans to improve targeting.

Public programs benefit from private delivery when speed matters more than precise targeting. Just Accepted new paper by Alexander W. Bartik, Zoe Cullen, Edward L. Glaeser, Michael Luca, Christopher Stanton, and Adi Sunderam. zurl.co/nyWqu

The Large Core of College Admission Markets: Theory and Evidence Abstract. We study college admissions markets where students can attend the same college under different financial terms. The deferred acceptance algorithm identifies a stable allocation where funding is allocated based on merit and the set of meritbased stable allocations is small. When students are heterogeneous in the way they trade off program characteristics and contractual terms, the set of stable allocations is large and different stable allocations differ in the number of assigned students. In Hungary, where such heterogeneity is present, a non-merit-based stable allocation would increase the number of assigned applicants by 1.9% relative to any merit-based stable allocation.

Just Accepted new paper, “The Large Core of College Admission Markets: Theory and Evidence” by Péter Biró, Avinatan Hassidim, Assaf Romm, Ran I. Shorrer, and Sándor Sóvágó zurl.co/rdydL

Taxation with a Grain of Salt: The Long-Term Effect of Extractive Fiscal Institutions on Development Abstract. This paper exploits the historical system of salt taxation in France to study the impact of extractive taxes on long-term economic development. Salt tax rates exhibited significant spatial variation, leading to discontinuous jumps in salt prices. Adopting a spatial regressiondiscontinuity design, we estimate the causal effect of the tax using original historical data. We extract geo-localized individual-level information on almost 70 million individuals living near tax borders between 1400 and 1900. These exogenous rate differentials had large effects, as areas burdened by lower rates exhibit higher economic development. These effects emerged after the tax’s introduction and persisted post-abrogation to the present day.

Just Accepted new paper, “Taxation with a Grain of Salt: The Long-Term Effect of Extractive Fiscal Institutions on Development” by Tommaso Giommoni and Gabriel Loumeau zurl.co/OBplD

Omitted Variable Bias in Interacted Models: A Cautionary Tale Abstract. We highlight that analyses using interaction terms to study treatment effect heterogeneity are susceptible to a form of omitted variable bias that is often overlooked in economics. Unlike most instances of omitted variable bias, the omitted variables in this case are available to the researcher but were not included in the model. We demonstrate that this exclusion matters based on a replication of 205 estimates across seventeen papers published in the American Economic Review over a five-year period. For approximately 60% of these papers, failing to account for the omitted variables changes the majority of estimates by more than 100%.

In the September issue, “Omitted Variable Bias in Interacted Models: A Cautionary Tale” by Benjamin Feigenberg, Ben Ost, and Javaeria A. Qureshi zurl.co/QoZY8

Do Homelessness Prevention Programs Prevent Homelessness? Evidence from a Randomized Controlled Trial Abstract. This paper provides the first evidence from a randomized controlled trial isolating the impact of financial assistance to prevent homelessness. In this study, individuals and families at imminent risk of homelessness were offered temporary financial assistance, averaging nearly $2,000 for those assigned to treatment. Our results show that this assistance significantly reduces homelessness by 3.8 percentage points from a base rate of 4.1%. The effects are larger for people with a history of homelessness and no children. Despite concerns about cost-effectiveness due to difficulty targeting, our estimates suggest that the benefits to homelessness prevention exceed costs.

Temporary financial assistance prevents homelessness for people at high risk of losing their housing. In the September issue, by David C. Phillips and James X. Sullivan zurl.co/7VZaW

Financing Municipal Water and Sanitation Services in Nairobi’s Informal Settlements Abstract. We test two ways to improve revenue collection efficiency for water and sanitation utilities: (i) face-to-face engagement between utility staff and customers and (ii) contract enforcement for service disconnection due to nonpayment in the form of transparent and credible disconnection notices. Engagement has no effect, while enforcement significantly increases payment. We find no effect on access to water, perceptions of the utility, relationships between tenants and property owners, or on tenant mental well-being nine months after the intervention. These results suggest that transparent contract enforcement was effective at improving revenue collection efficiency without incurring significant observed social or political costs.

In the September issue, “Financing Municipal Water and Sanitation Services in Nairobi’s Informal Settlements” by Aidan Coville, Sebastian Galiani, Paul Gertler, and Susumu Yoshida. zurl.co/NcFrJ

Bayesian Local Projections Abstract. We propose a Bayesian approach to Local Projections (LPs) that optimally addresses the empirical bias-variance trade-off intrinsic in the choice between direct and iterative methods. Bayesian Local Projections (BLPs) regularize LP regressions via informative priors and estimate impulse response functions that capture the properties of the data more accurately than iterative VARs. BLPs preserve the flexibility of LPs while retaining a degree of estimation uncertainty comparable to Bayesian VARs with standard macroeconomic priors. As regularized direct forecasts, BLPs are also a valuable alternative to BVARs for multivariate out-of-sample projections.

BLP estimate response functions to shocks, balancing the bias-variance trade-off of iterated vs. direct methods. In the September issue, by Leonardo N. Ferreira, Silvia Miranda-Agrippino, and Giovanni Ricco zurl.co/pKqtj

Health Effects of Downsizing Survival Abstract. We show that downsizing has substantial negative effects on the health of workers who remain in the firm. We study mass layoff (ML) survivors in Austria, using workers who survive a ML themselves, but a few years in the future, as a control group. Based on high-quality administrative data, we find evidence that downsizing has persistent effects on mental and physical health, and that these effects can be explained by workers fearing for their own jobs. We also show that health effects due to downsizing imply nonnegligible costs for firms.

Downsizing affects the health of workers who remain in the firm. In the September issue, by Alexander Ahammer, Dominik Grübl, and Rudolf Winter-Ebmer zurl.co/cUgBR

A Large-Scale Field Experiment to Reduce Nonpayments for Water: From Diagnosis to Treatment Abstract. In a field experiment among 9,823 customers of the Namibian water utility, we implement interventions to reduce nonpayments. The interventions are based on diagnostic surveys to identify key obstacles to payments. They address informational frictions and apply psychological commitment techniques to narrow the gap between customers’ willingness to pay and actual payments. Initially, payments increase by 29% to 55%, making the interventions highly cost-effective. Removing informational frictions has a lasting impact, but the commitment techniques produce only short-term effects. We demonstrate the effectiveness and limitations of behavioral interventions in settings where heavy-handed tools (e.g., disconnecting nonpayers) are difficult to implement.

From behavioral diagnosis to highly cost-effective interventions to tackle non-payment for public utilities. In the September issue, by Bettina Rockenbach, Sebastian Tonke, Arne Weiss zurl.co/5yS0t

Exporting, Wage Profiles, and Human Capital: Evidence from Brazil Abstract. Export activity shapes workers’ experience-wage profiles. Using employer-employee and customs data for Brazilian manufacturing, we document that workers’ experience-wage profiles are steeper at exporters than at non-exporters and, among exporters, steeper at exporters shipping to high-income destinations. We develop and quantify a model featuring worker-firm wage bargaining, export-market entry by multi-worker firms, and human capital accumulation by workers to interpret the data. Human capital growth can explain one-half of the differences in wage profiles between exporters and non-exporters. We show that increased human capital per worker can account for one-half of the overall gains in real income from trade openness.

Workers enjoy faster wage growth at exporters than non-exporters, partly driven by human capital formation. In the September issue, by Xiao Ma, Marc-Andreas Muendler, and Alejandro Nakab zurl.co/mb807

Imperfect Exchange Rate Expectations Abstract. Using survey data, we document that predictable exchange rate forecast errors are responsible for the uncovered interest parity (UIP) puzzle and its reversal at longer horizons. We develop a general-equilibrium model based on shock misperception and overextrapolative beliefs that reconciles these and other major exchange rate puzzles. These beliefs distortions generate both under- and over-reaction of expectations that account for the predictability of forecast errors about interest rates, exchange rates, and other macroeconomic indicators. In the model, forecast errors are endogenous to monetary policy and explain the change in the behavior of UIP deviations that emerged after the global financial crisis.

Under- and over-reaction of expectations can explain the puzzles surrounding uncovered interest rate parity. In the September issue, by Giacomo Candian and Pierre De Leo zurl.co/820Jo

One-Child Policy, Marriage Distortion, and Welfare Loss Abstract. We investigate how exposure to the One-Child Policy (OCP) during early adulthood affects marriage and fertility in China. Exploring fertility penalties across provinces over time and the different implementations by ethnicity, we show that the OCP significantly increases the unmarried rate among the Han ethnicity but not among the minorities. The OCP increases Han-minority marriages in regions where Han-minority couples are allowed an additional child, but the impact is smaller in other regions. Finally, the deadweight loss caused by lower fertility accounts for 10% of annual household incomes, and policy-induced fewer marriages contribute to 30% of the fertility decline.

In the September issue, "One-Child Policy, Marriage Distortion, and Welfare Loss" by Wei Huang, Yinghao Pan, and Yi Zhou zurl.co/0UYJX

Sibling Differences in Genetic Propensity for Education: How Do Parents React? Abstract. We take advantage of recent advances in genomics to revisit a classic question in economics: how do parents respond to children’s endowments and to sibling differences in endowments? We use an index based on DNA, which is fixed at conception and assigned randomly across siblings, as a proxy for educational endowments. We find that parents of nontwins display inequality aversion: given the absolute endowment level of one child, they invest less in him/her if his/her sibling has a lower genetic predisposition to education. In contrast, we find no evidence that parents of dizygotic twins react to endowment differences between children.

A study how parents respond to children’s genetic endowments and to sibling differences in endowments. In the September issue, by Anna Sanz-de-Galdeano and Anastasia Terskaya zurl.co/Ee8tO

Does Economics Make You Sexist? Abstract. We provide direct evidence on explicit and implicit biases against women among students in economics relative to other fields. We conducted a large scale survey among undergraduates in Chile, among both entering first-year students and students in years 2 and above, combining a wide battery of measures to create an index of gender bias. Economics students are more biased than students in other fields. There is some evidence that economics students are more biased already upon entry, before exposure to economics classes. The gap becomes more pronounced among students in years 2 and above, especially for male students.

A large scale survey in Chile is used to analyze whether studying economics makes students more gender biased. In the September issue, by Valentina Paredes, M. Daniele Paserman, Francisco J. Pino zurl.co/QLlI0

Price Discrimination in Selection Markets Abstract. Should insurance prices vary with age? I consider competitive markets for lemons where a signal (e.g., age) partitions consumers (e.g., young and old). I study the continuum of policies from zero price discrimination (zero PD, equal prices) to full PD (no restrictions). Restricting PD can increase welfare if high-cost markets exhibit greater adverse selection, or when the high-cost market “unravels.” I characterize optimal PD and show how it is affected by changes in cost. In a calibration, optimal PD increases welfare by about $30/person-year. I extend the model to arbitrary signal structures, behavioral consumers, a monopolized industry, and multiproduct firms.

Community rating is good if costly individuals (e.g., the elderly) experience the most adverse selection. In the September issue, by Andre Veiga zurl.co/gbcvf

Did the Federal Reserve Break the Phillips Curve? Theory and Evidence of Anchoring Inflation Expectations Abstract. In a macroeconomic model with drifting long-run inflation expectations, the anchoring of inflation expectations manifests in two testable predictions. First, expectations about inflation far in the future should no longer respond to news about current inflation. Second, better anchored inflation expectations weaken the relationship between unemployment and inflation, flattening the reduced-form Phillips curve. We evaluate both predictions and find that the Federal Reserve’s communication of a numerical inflation objective, first through its Summary of Economic Projections and later through the announcement of a 2% target in 2012, better anchored inflation expectations. Moreover, inflation expectations in the United States have remained anchored amid the volatility of the COVID-19 pandemic. In contrast, similar analysis reveals no evidence of anchoring in Japan despite the adoption of a numerical inflation target.

The Federal Reserve's communication of an inflation objective better anchored inflation expectations. In the September issue, by Brent Bundick and A. Lee Smith zurl.co/eptQ1