Monday, October 16, 2017

OCTOBER 12 2017

Kenneth Rogoff , Project Syndicate: Crypto-Fool’s Gold? The price of Bitcoin is up 600% over the past 12 months, and 1,600% in the past 24 months. But the long history of currency tells us that what the private sector innovates, the state eventually regulates and appropriates – and there is no reason to expect virtual currency to avoid a similar fate.

Francesca Gino, Harvard Business Review: The Rise of Behavioral Economics and Its Influence on Organizations. Nudges can solve all sorts of problems governments and businesses alike consider important. Here are some examples. A few years ago, for instance, General Electric’s leaders wanted to address the issue of smoking, believing that it impacted its employees negatively. So, in collaboration with Kevin Volpp and his co-authors, they conducted a randomized controlled trial (think: field experiment). Employees in the treatment group each received $250 if they stopped for six months and $400 if they stopped for 12 months. Those in the control group did not receive any incentive. The researchers found that the treatment group had three times the success rate of the control, and that the effect persisted even after the incentives were discontinued after 12 months. Based on this work, GE changed its policy and started using this approach for its then-152,000 employees.
Vitor Gaspar, Mercedes Garcia-Escribano, IMF: Inequality: Fiscal Policy Can Make the Difference. Fiscal policy accounts for a large share of differences in inequality across countries. In advanced economies, fiscal policy offsets about a third of income inequality before taxes and transfers—commonly known as market income inequality—with 75 percent coming from transfers. Spending on education and health also affects market income inequality over time by promoting social mobility, including across generations. In developing economies, fiscal redistribution is much weaker, given lower and less progressive taxes and spending
Eduardo Porter, NYT: Why Big Cities Thrive, and Smaller Ones Are Being Left Behind. The dismal performance is not surprising. Built on coal and steel, Steubenville and Weirton were ill suited to survive the transformations brought about by globalization and the information economy. They have been losing population since the 1980s. To prove his point, Mr. Muro compared the 100 largest metropolitan areas in the country, those with populations above 550,000, with the 182 smallest, which have populations ranging from 80,000 to about 215,000. The difference in performance widened: Private employment grew almost twice as fast in large metropolitan areas as it did in small ones from the trough of the recession, in 2009, to 2015. Income grew 50 percent faster. And the labor participation rate — the share of the working-age population in the labor force — shrank only half as much. “Economic transitions work against smaller America.”
Atila Abdulkadiroglu, Parag A. Pathak, Jonathan Schellenberg, Christopher R. Walters, NBER: Do Parents Value School Effectiveness? School choice may lead to improvements in school productivity if parents' choices reward effective schools and punish ineffective ones. This mechanism requires parents to choose schools based on causal effectiveness rather than peer characteristics. We study relationships among parent preferences, peer quality, and causal effects on outcomes for applicants to New York City's centralized high school assignment mechanism. We use applicants' rank-ordered choice lists to measure preferences and to construct selection-corrected estimates of treatment effects on test scores and high school graduation. We also estimate impacts on college attendance and college quality. Parents prefer schools that enroll high-achieving peers, and these schools generate larger improvements in short- and long-run student outcomes. We find no relationship between preferences and school effectiveness after controlling for peer quality.
Petra Thiemann, Lund University and IZA: The Persistent Effects of Short-Term Peer Groups in Higher Education. This paper demonstrates that short-term peer exposure can generate achievement effects which persist for several months and years. I study a mandatory freshmen week for firstyear undergraduates and exploit the random assignment of students to freshmen teams. I find that the freshmen week contributes to the formation of persistent social ties. Furthermore, peers’ observable characteristics impact college achievement for up to three years. Ability peer effects are non-linear, i.e. very high or low levels of average peer ability in a group harm students’ grades. These effects are most pronounced for low-ability students.
Josue Ortega, Philipp Hergovich, University of Essex: The Strength of Absent Ties: Social Integration via Online Dating. We used to marry people to which we were somehow connected to: friends of friends, schoolmates, neighbours. Since we were more connected to people similar to us, we were likely to marry someone from our own race. However, online dating has changed this pattern: people who meet online tend to be complete strangers. Given that one-third of modern marriages start online, we investigate theoretically, using random graphs and matching theory, the effects of those previously absent ties in the diversity of modern societies. We find that when a society benefits from previously absent ties, social integration occurs rapidly, even if the number of partners met online is small. Our findings are consistent with the sharp increase in interracial marriages in the U.S. in the last two decades.
Eran Yashiv, VOX: The value of top footballers, bubbles, and pitfalls of the free market. The €222 million transfer of Neymar to PSG calls into question whether football superstars are a good investment. Using the financial details of the transfer, this column argues that, at the price paid, Neymar has a negative net present value. While there are other explanations for PSG's willingness to pay, in purely economic terms his contract seems a bad investment. Policymakers might use this type of calculation to justify intervening in the transfer market through regulation and taxation.

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