Wednesday, February 21, 2018

JANUARY 18 2017

Yuliya Baranova, Carsten Jung, Joseph Noss, BoE: The tip of the iceberg: the implications of climate change on financial markets. There has been a recent increase in awareness of investors that limiting emissions to prevent climate change might leave a substantial proportion of the world’s carbon reserves unusable, and that this could lead to revaluations across a range of financial assets. If risks are left unaddressed, this could result in large losses for some investors. But is this adjustment in financial market prices likely to be abrupt?  And – even if it is – is it likely to pose risks to financial stability?  We argue that the answer to both these questions could be yes:  financial valuations can move sharply even if the transition to sustainable energy were smooth.  And exposures are sufficiently large to warrant attention from both investors and policymakers.

Ross Levine, Yona Rubinstein, The Quarterly Journal of Economics: Smart and Illicit: Who Becomes an Entrepreneur and Do They Earn More? We disaggregate the self-employed into incorporated and unincorporated to distinguish between “entrepreneurs” and other business owners. We show that the incorporated self-employed and their businesses engage in activities that demand comparatively strong nonroutine cognitive abilities, while the unincorporated and their firms perform tasks demanding relatively strong manual skills. People who become incorporated business owners tend to be more educated and—as teenagers—score higher on learning aptitude tests, exhibit greater self-esteem, and engage in more illicit activities than others. The combination of “smart” and “illicit” tendencies as youths accounts for both entry into entrepreneurship and the comparative earnings of entrepreneurs. Individuals tend to experience a material increase in earnings when becoming entrepreneurs, and this increase occurs at each decile of the distribution.
Giuseppe Forte, Jonathan Portes, IZA: Macroeconomic Determinants of International Migration to the UK. This paper examines the determinants of long-term international migration to the UK; we explore the extent to which migration is driven by macroeconomic variables (GDP per capita, unemployment rate) as well as law and policy (the existence of "free movement" rights for EEA nationals). We find a very large impact from free movement within the EEA. We also find that macroeconomic variables – UK GDP growth and GDP at origin – are significant drivers of migration flows; evidence for the impact of the unemployment rate in countries of origin, or of the exchange rate, however, is weak. We conclude that, while future migration flows will be driven by a number of factors, macroeconomic and otherwise, Brexit and the end of free movement will result in a large fall in immigration from EEA countries to the UK.
Michael A. Clemens, IZA: Violence, Development and Migration Waves: Evidence from Central American Child Migrant Apprehensions.  A recent surge in child migration to the U.S. from Honduras, El Salvador, and Guatemala has occurred in the context of high rates of regional violence. But little quantitative evidence exists on the causal relationship between violence and international emigration in this or any other region. This paper studies the relationship between violence in the Northern Triangle and child migration to the United States using novel, individual-level, anonymized data on all 178,825 U.S. apprehensions of unaccompanied child migrants from these countries between 2011 and 2016. It finds that one additional homicide per year in the region, sustained over the whole period – that is, a cumulative total of six additional homicides – caused a cumulative total of 3.7 additional unaccompanied child apprehensions in the United States. The explanatory power of short-term increases in violence is roughly equal to the explanatory power of long-term economic characteristics like average income and poverty. Due to diffusion of migration experience and assistance through social networks, violence can cause waves of migration that snowball over time, continuing to rise even when violence levels do not.
David G. Blanchflower, Andrew J. Oswald, IZA: Do Humans Suffer a Psychological Low in Midlife? Two Approaches (With and Without Controls) in Seven Data Sets. Using seven recent data sets, covering 51 countries and 1.3 million randomly sampled people, the paper examines the pattern of psychological well-being from approximately age 20 to age 90. Two conceptual approaches to this issue are possible. Despite what has been argued in the literature, neither is the 'correct' one, because they measure different things. One studies raw numbers on well-being and age. This is the descriptive approach. The second studies the patterns in regression equations for well-being (that is, adjusting for other influences). This is the ceteris-paribus analytical approach. The paper applies each to large cross-sections and compares the patterns of life-satisfaction and happiness. Using the first method, there is evidence of a midlife low in five of the seven data sets. Using the second method, all seven data sets produce evidence consistent with a midlife low. The scientific explanation for the approximate U-shape currently remains unknown.
Denis Paiste, MIT News: Using evolutionary dynamics and game theory to understand personal relations. MIT biophysicists apply mathematics from evolutionary biology to describe a surprising aspect of human behavior. This model is a solid contribution to our understanding of principles of behavior, cooperation, and morality, and more generally fits within a wider literature that is important and insightful which uses game theoretic models and models of learning and evolutionary processes to understand puzzling aspects of human social behavior,” Hoffman says. “How else can we understand our social species if we don't try and uncover the hidden function behind what they do think and believe? And what better tools to do that than models of game theory, learning and evolutionary processes.
Elizabeth Linos, Joanne Reinhard, Simon Ruda and Michael Sanders, Behavioural Insights Team: Measuring the impact of body worn video cameras on police behaviour and criminal justice outcomes. The results of this trial indicate that BWVCs can improve police decision making in several ways: leading to fewer unnecessary Stop and Searches and improvements in metrics related to prosecutions. Additionally, we find wellbeing-related benefits to wearing a BWVCs, such as reduced sickness absenteeism rates and self-reported feelings of safety when conducting a Stop and Search. The findings also flag the need for further research on the impact of BWVCs: for example, the increase in allegations against officers could be explored further by analysing metrics that could not be collected as part of this trial (such as the reason for the complaint and levels of use of force by the officer).

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