An extensive literature in economics documents large and persistent declines in earnings following involuntary job loss. We study whether the public safety net mitigates this loss in resources using the Survey of Income and Program Participation in 1996-2013. With an individual fixed effects model, we document which public safety net programs provide the most insurance, and how this varies by pre-job-loss characteristics. We find that Unemployment Insurance provides the largest buffer against lost income, but that due to the structure of the program, the neediest are less-well insured (in terms of dollars transferred and percentage of lost earnings replaced), compared to middle and higher income job losers. This has important implications for the progressivity of the safety net, and how best to support displaced workers, which is crucial to understand for job losers at any time, and especially now, in light of the historic number of job losses during the COVID-19 pandemic.
{"title":"How Well Insured are Job Losers? Efficacy of the Public Safety Net.","authors":"Chloe N. East, David Simon","doi":"10.3386/w28218","DOIUrl":"https://doi.org/10.3386/w28218","url":null,"abstract":"An extensive literature in economics documents large and persistent declines in earnings following involuntary job loss. We study whether the public safety net mitigates this loss in resources using the Survey of Income and Program Participation in 1996-2013. With an individual fixed effects model, we document which public safety net programs provide the most insurance, and how this varies by pre-job-loss characteristics. We find that Unemployment Insurance provides the largest buffer against lost income, but that due to the structure of the program, the neediest are less-well insured (in terms of dollars transferred and percentage of lost earnings replaced), compared to middle and higher income job losers. This has important implications for the progressivity of the safety net, and how best to support displaced workers, which is crucial to understand for job losers at any time, and especially now, in light of the historic number of job losses during the COVID-19 pandemic.","PeriodicalId":18934,"journal":{"name":"National Bureau of Economic Research","volume":"11 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2020-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"87962803","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Using three unique micro datasets, we find that an unexpected and unprecedented loosening of China's LTV policy for non-primary houses fueled the entire mortgage boom during 2014Q4-2016Q3. The mortgage expansion disproportionately increased the share of mortgages to middle-aged homeowners with high education, while their consumption growth declined persistently. To interpret these empirical findings, we develop a quantitative model and identify that homeowners' trade-up of their primary homes as speculative housing investment is a key channel for a change in LTV policy to exert aggregate and distributional impacts on mortgage markets. Our cross-city evidence provides empirical support for this channel.
{"title":"Aggregate and Distributional Impacts of LTV Policy: Evidence from China's Micro Data","authors":"Kaiji Chen, Qing Wang, Tong Xu, T. Zha","doi":"10.3386/w28092","DOIUrl":"https://doi.org/10.3386/w28092","url":null,"abstract":"Using three unique micro datasets, we find that an unexpected and unprecedented loosening of China's LTV policy for non-primary houses fueled the entire mortgage boom during 2014Q4-2016Q3. The mortgage expansion disproportionately increased the share of mortgages to middle-aged homeowners with high education, while their consumption growth declined persistently. To interpret these empirical findings, we develop a quantitative model and identify that homeowners' trade-up of their primary homes as speculative housing investment is a key channel for a change in LTV policy to exert aggregate and distributional impacts on mortgage markets. Our cross-city evidence provides empirical support for this channel.","PeriodicalId":18934,"journal":{"name":"National Bureau of Economic Research","volume":"1 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2020-11-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"86542503","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Itzhak Ben-David, Jiacui Li, Andrea Rossi, Yang Song
We show that advice in the form of mutual fund ratings generates correlated demand that creates systematic price fluctuations. Mutual fund investors chase fund performance via Morningstar ratings. Until June 2002, funds pursuing the same investment style had highly correlated ratings. Therefore, rating-chasing investors directed capital into winning styles, generating style-level price pressures that reverted over time. In June 2002, Morningstar reformed its methodology to equalize ratings across styles. Style-level correlated demand via mutual funds immediately became muted, significantly altering the time-series and cross-sectional variation of style returns. Advice-driven demand also explains substantial variation in the size and value factors.
{"title":"Advice-Driven Demand and Systematic Price Fluctuations","authors":"Itzhak Ben-David, Jiacui Li, Andrea Rossi, Yang Song","doi":"10.3386/W28103","DOIUrl":"https://doi.org/10.3386/W28103","url":null,"abstract":"We show that advice in the form of mutual fund ratings generates correlated demand that creates systematic price fluctuations. Mutual fund investors chase fund performance via Morningstar ratings. Until June 2002, funds pursuing the same investment style had highly correlated ratings. Therefore, rating-chasing investors directed capital into winning styles, generating style-level price pressures that reverted over time. In June 2002, Morningstar reformed its methodology to equalize ratings across styles. Style-level correlated demand via mutual funds immediately became muted, significantly altering the time-series and cross-sectional variation of style returns. Advice-driven demand also explains substantial variation in the size and value factors.","PeriodicalId":18934,"journal":{"name":"National Bureau of Economic Research","volume":"3069 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2020-11-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"86551899","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We examine how the large, one-time legalization authorized by the Immigration Reform and Control Act (IRCA) has affected the scale and character of immigration to the U.S. since the late 1980s. Exploiting cross-country variation in the magnitude of the legalization shock, we find that each IRCA admit accounts for the subsequent admission of 1 to 2 family members, mostly immediate family. There is little evidence that the legalization increased subsequent unauthorized migration; in fact, fewer temporary visa overstays have somewhat offset the additional family admissions. The marginal family-sponsored admit has not been negatively selected and has not increased fiscal burdens.
{"title":"Opening the Door: Immigrant Legalization and Family Reunification in the United States","authors":"Elizabeth U. Cascio, Ethan G. Lewis","doi":"10.3386/w27874","DOIUrl":"https://doi.org/10.3386/w27874","url":null,"abstract":"We examine how the large, one-time legalization authorized by the Immigration Reform and Control Act (IRCA) has affected the scale and character of immigration to the U.S. since the late 1980s. Exploiting cross-country variation in the magnitude of the legalization shock, we find that each IRCA admit accounts for the subsequent admission of 1 to 2 family members, mostly immediate family. There is little evidence that the legalization increased subsequent unauthorized migration; in fact, fewer temporary visa overstays have somewhat offset the additional family admissions. The marginal family-sponsored admit has not been negatively selected and has not increased fiscal burdens.","PeriodicalId":18934,"journal":{"name":"National Bureau of Economic Research","volume":"15 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2020-10-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"74658423","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Small retail investors at the Robinhood (RH) retail brokerage firm from 2018 to 2020 shared with Finnish and larger US investors from the 1990s a preference for extreme recent winners and losers. Interestingly, this preference held even for the overall stock market during the March-2020 Covid crisis, indicating an absence of panic and margin calls. Thus, RH investors acted as a (small) market-stabilizing force. They were also unusually interested in some “experience” stocks (e.g., Cannabis stocks). Nevertheless, the narrative of pure irrational exuberance is misleading. Collectively, RH investors bought and held stocks with large past share-volume and dollar-volume, making them invest overwhelmingly in large rather than in obscure stocks. A portfolio constructed on the basis of just these two variables can make it possible to mimick the investments of RH traders, plausibly even beyond the sample. The collective RH crowd portfolio also did not underperform with respect to standard academic benchmark models.
{"title":"Retail Raw: Wisdom of the Robinhood Crowd and the COVID Crisis","authors":"I. Welch","doi":"10.2139/SSRN.3696066","DOIUrl":"https://doi.org/10.2139/SSRN.3696066","url":null,"abstract":"Small retail investors at the Robinhood (RH) retail brokerage firm from 2018 to 2020 shared with Finnish and larger US investors from the 1990s a preference for extreme recent winners and losers. Interestingly, this preference held even for the overall stock market during the March-2020 Covid crisis, indicating an absence of panic and margin calls. Thus, RH investors acted as a (small) market-stabilizing force. They were also unusually interested in some “experience” stocks (e.g., Cannabis stocks). Nevertheless, the narrative of pure irrational exuberance is misleading. Collectively, RH investors bought and held stocks with large past share-volume and dollar-volume, making them invest overwhelmingly in large rather than in obscure stocks. A portfolio constructed on the basis of just these two variables can make it possible to mimick the investments of RH traders, plausibly even beyond the sample. The collective RH crowd portfolio also did not underperform with respect to standard academic benchmark models.","PeriodicalId":18934,"journal":{"name":"National Bureau of Economic Research","volume":"67 8","pages":""},"PeriodicalIF":0.0,"publicationDate":"2020-09-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"72602333","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We provide a quantitative analysis of the trade-offs between health outcomes and the distribution of economic outcomes associated with alternative policy responses to the COVID-19 pandemic. We integrate an expanded SIR model of virus spread into a macroeconomic model with realistic income and wealth inequality, as well as occupational and sectoral heterogeneity. In the model, as in the data, economic exposure to the pandemic is strongly correlated with financial vulnerability, leading to very uneven economic losses across the population. We summarize our findings through a "distributional pandemic possibility frontier," which shows the distribution of economic welfare costs associated with the different aggregate mortality rates arising under alternative containment and fiscal strategies. For all combinations of health and economic policies we consider, the economic welfare costs of the pandemic are large and heterogeneous. Thus, the choice governments face when designing policy is not just between lives and livelihoods, as is often emphasized, but also over who should bear the burden of the economic costs. We offer a quantitative framework to evaluate both trade-offs.
{"title":"The Great Lockdown and the Big Stimulus: Tracing the Pandemic Possibility Frontier for the U.S.","authors":"Greg Kaplan, Benjamin Moll, G. Violante","doi":"10.3386/w27794","DOIUrl":"https://doi.org/10.3386/w27794","url":null,"abstract":"We provide a quantitative analysis of the trade-offs between health outcomes and the distribution of economic outcomes associated with alternative policy responses to the COVID-19 pandemic. We integrate an expanded SIR model of virus spread into a macroeconomic model with realistic income and wealth inequality, as well as occupational and sectoral heterogeneity. In the model, as in the data, economic exposure to the pandemic is strongly correlated with financial vulnerability, leading to very uneven economic losses across the population. We summarize our findings through a \"distributional pandemic possibility frontier,\" which shows the distribution of economic welfare costs associated with the different aggregate mortality rates arising under alternative containment and fiscal strategies. For all combinations of health and economic policies we consider, the economic welfare costs of the pandemic are large and heterogeneous. Thus, the choice governments face when designing policy is not just between lives and livelihoods, as is often emphasized, but also over who should bear the burden of the economic costs. We offer a quantitative framework to evaluate both trade-offs.","PeriodicalId":18934,"journal":{"name":"National Bureau of Economic Research","volume":"77 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2020-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"75204599","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We explore how lowering labor market frictions for female workers affects corporate performance. Using the staggered adoption of state-level Paid Family Leave acts, we provide causal evidence on the value created by relieving frictions to accessing female talent, for private and public firms. Reduced turnover and rising female leadership are potential mechanisms that contribute to performance gains. Across specifications, our estimates indicate that treated establishments’ productivity increases between 4% and 5% relative to neighbor control establishments. The treatment effect is larger when workers are in less religious counties and in those with more women of childbearing age.
{"title":"Forced) Feminist Firms","authors":"Benjamin Bennett, Isil Erel, L. Stern, Zexi Wang","doi":"10.3386/w27788","DOIUrl":"https://doi.org/10.3386/w27788","url":null,"abstract":"We explore how lowering labor market frictions for female workers affects corporate performance. Using the staggered adoption of state-level Paid Family Leave acts, we provide causal evidence on the value created by relieving frictions to accessing female talent, for private and public firms. Reduced turnover and rising female leadership are potential mechanisms that contribute to performance gains. Across specifications, our estimates indicate that treated establishments’ productivity increases between 4% and 5% relative to neighbor control establishments. The treatment effect is larger when workers are in less religious counties and in those with more women of childbearing age.","PeriodicalId":18934,"journal":{"name":"National Bureau of Economic Research","volume":"377 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2020-08-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"73891126","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Social policy to limit interactions can slow the spread of infection, but this benefit comes at the cost of reduced output. We solve an optimal control problem to choose the degree of interaction to maximize an objective function that rewards output and penalizes excess deaths. Optimal policy restricts the degree of interaction—permanently and perhaps substantially—but, surprisingly, not so much as to eradicate the disease. This finding holds regardless of how much weight the objective function places on excess deaths, provided the weight is finite. Complete eradication is optimal only if achieved by science or medicine.
{"title":"Optimal Management of a Pandemic in the Short Run and the Long Run","authors":"Andrew B. Abel, Stavros Panageas","doi":"10.3386/w27742","DOIUrl":"https://doi.org/10.3386/w27742","url":null,"abstract":"Social policy to limit interactions can slow the spread of infection, but this benefit comes at the cost of reduced output. We solve an optimal control problem to choose the degree of interaction to maximize an objective function that rewards output and penalizes excess deaths. Optimal policy restricts the degree of interaction—permanently and perhaps substantially—but, surprisingly, not so much as to eradicate the disease. This finding holds regardless of how much weight the objective function places on excess deaths, provided the weight is finite. Complete eradication is optimal only if achieved by science or medicine.","PeriodicalId":18934,"journal":{"name":"National Bureau of Economic Research","volume":"53 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2020-08-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"73651390","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Miguel Garza Casado, Britta Glennon, J. Lane, David McQuown, Daniel P. Rich, Bruce A. Weinberg
Policymakers, faced with different options for replacing lost earnings, have had limited evidence to inform their decisions. The current economic crisis has highlighted the need for data that are local and timely so that different fiscal policy options on local economies can be more immediately evaluated. This paper provides a framework for evaluating real-time effects of fiscal policy on local economic activity using two new sources of near real-time data. The first data source is administrative records that provide universal, weekly, information on unemployment claimants. The second data source is transaction level data on economic activity that are available on a daily basis. We use shift-share approaches, combined with these two data sources and the novel cross-county variation in the incidence of the COVID-19 supplement to Unemployment Insurance to estimate the local impact of unemployment, earnings replacement, and their interaction on economic activity. We find that higher replacement rates lead to significantly more consumer spending – even with increases in the unemployment rate – consistent with the goal of the fiscal stimulus. Our estimates suggest that, based on the latest data, eliminating the Federal Pandemic Unemployment Compensation (FPUC) supplement would lead to a 44% decline in local spending. If the FPUC supplement is reduced to $200, resulting in a reduction of the replacement rate by 44%, spending would fall by 28%. Even if the FPUC supplement is reduced to $400, the replacement rate would fall by 29% and spending would fall by 12%. Because these data are available in every state, the approach can be used to inform decision making not just in this current crisis, but also in future recessions.
{"title":"The Aggregate Effects of Fiscal Stimulus: Evidence from the COVID-19 Unemployment Supplement","authors":"Miguel Garza Casado, Britta Glennon, J. Lane, David McQuown, Daniel P. Rich, Bruce A. Weinberg","doi":"10.3386/w27576","DOIUrl":"https://doi.org/10.3386/w27576","url":null,"abstract":"Policymakers, faced with different options for replacing lost earnings, have had limited evidence to inform their decisions. The current economic crisis has highlighted the need for data that are local and timely so that different fiscal policy options on local economies can be more immediately evaluated. This paper provides a framework for evaluating real-time effects of fiscal policy on local economic activity using two new sources of near real-time data. The first data source is administrative records that provide universal, weekly, information on unemployment claimants. The second data source is transaction level data on economic activity that are available on a daily basis. We use shift-share approaches, combined with these two data sources and the novel cross-county variation in the incidence of the COVID-19 supplement to Unemployment Insurance to estimate the local impact of unemployment, earnings replacement, and their interaction on economic activity. We find that higher replacement rates lead to significantly more consumer spending – even with increases in the unemployment rate – consistent with the goal of the fiscal stimulus. Our estimates suggest that, based on the latest data, eliminating the Federal Pandemic Unemployment Compensation (FPUC) supplement would lead to a 44% decline in local spending. If the FPUC supplement is reduced to $200, resulting in a reduction of the replacement rate by 44%, spending would fall by 28%. Even if the FPUC supplement is reduced to $400, the replacement rate would fall by 29% and spending would fall by 12%. Because these data are available in every state, the approach can be used to inform decision making not just in this current crisis, but also in future recessions.","PeriodicalId":18934,"journal":{"name":"National Bureau of Economic Research","volume":"16 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2020-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"85325612","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Aidan Coville, S. Galiani, P. Gertler, Susumu Yoshida
Most of the recent focus in the delivery of public utility services has been on last mile connections to water, sewerage and electricity grids. However, the high frequency of nonpayment for services associated with this expansion has created a fiscal crisis for public utilities and has forced utilities to ration services. Public utilities afraid that service disconnections will have political consequences are reluctant to enforce payment with service cutoff. We test this hypothesis using a field experiment in the slums of Nairobi with two interventions intended to improve repayment for water and sewage services: a soft encouragement that informs tenants about landlord’s payment delinquency and, second, a hard threat of disconnection for nonpayment with enforcement if landlords do not pay. While we find no effect of the soft encouragement intervention, we find very large effects of the disconnection intervention on repayment. Moreover, there seems to be no effect on landlord and tenant perceptions of utility fairness or quality of service delivery, on community activism, on the relationships of tenants with their landlords, or on child health. To counterbalance the effective increase in utility fees paid, landlords increase their rental income by both renting out additional space in their compounds and by marginally increasing tenant rents. These results suggest that strict enforcement through disconnections increases payment and the financial position of the utility without incurring political costs.
{"title":"Financing Municipal Water and Sanitation Services in Nairobi’s Informal Settlements","authors":"Aidan Coville, S. Galiani, P. Gertler, Susumu Yoshida","doi":"10.3386/w27569","DOIUrl":"https://doi.org/10.3386/w27569","url":null,"abstract":"Most of the recent focus in the delivery of public utility services has been on last mile connections to water, sewerage and electricity grids. However, the high frequency of nonpayment for services associated with this expansion has created a fiscal crisis for public utilities and has forced utilities to ration services. Public utilities afraid that service disconnections will have political consequences are reluctant to enforce payment with service cutoff. We test this hypothesis using a field experiment in the slums of Nairobi with two interventions intended to improve repayment for water and sewage services: a soft encouragement that informs tenants about landlord’s payment delinquency and, second, a hard threat of disconnection for nonpayment with enforcement if landlords do not pay. While we find no effect of the soft encouragement intervention, we find very large effects of the disconnection intervention on repayment. Moreover, there seems to be no effect on landlord and tenant perceptions of utility fairness or quality of service delivery, on community activism, on the relationships of tenants with their landlords, or on child health. To counterbalance the effective increase in utility fees paid, landlords increase their rental income by both renting out additional space in their compounds and by marginally increasing tenant rents. These results suggest that strict enforcement through disconnections increases payment and the financial position of the utility without incurring political costs.","PeriodicalId":18934,"journal":{"name":"National Bureau of Economic Research","volume":"28 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2020-07-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"72706331","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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