FEBRUARY 22 2018

Matthieu Bussiere, Menzie D. Chinn, Laurent Ferrara, Jonas Heipertz, NBER: The New Fama Puzzle. We re-examine the Fama (1984) puzzle – the finding that ex post depreciation and interest differentials are negatively correlated, contrary to what theory suggests – for eight advanced country exchange rates against the US dollar, over the period up to February 2016. The rejection of the joint hypothesis of uncovered interest parity (UIP) and rational expectations – sometimes called the unbiasedness hypothesis – still occurs, but with much less frequency. Strikingly, in contrast to earlier findings, the Fama regression coefficient is positive and large in the period after the global financial crisis. However, using survey based measures of exchange rate expectations, we find much greater evidence in favor of UIP. Hence, the main story for the switch in Fama coefficients in the wake of the global financial crisis is mostly a change in how expectations errors and interest differentials co-move, though the risk premium also plays a critical role for safe haven currencies (Japanese yen and Swiss franc).

David A. Jaeger, Joakim Ruist, Jan Stuhler, IZA: Shift-Share Instruments and the Impact of Immigration. A large literature exploits geographic variation in the concentration of immigrants to identify their impact on a variety of outcomes. To address the endogeneity of immigrants' location choices, the most commonly-used instrument interacts national inflows by country of origin with immigrants' past geographic distribution. We present evidence that estimates based on this "shift-share" instrument conflate the short- and long-run responses to immigration shocks. If the spatial distribution of immigrant inflows is stable over time, the instrument is likely to be correlated with ongoing responses to previous supply shocks. Estimates based on the conventional shift-share instrument are therefore unlikely to identify the short-run causal effect. We propose a "multiple instrumentation" procedure that isolates the spatial variation arising from changes in the country-of-origin composition at the national level and permits us to estimate separately the short- and long-run effects. Our results are a cautionary tale for a large body of empirical work, not just on immigration, that rely on shift-share instruments for causal inference.

Seetha Menon, Andrea Salvatori, Wouter Zwysen, IZA: The Effect of Computer Use on Job Quality: Evidence from Europe. This paper studies changes in computer use and job quality in the EU-15 between 1995 and 2015. We document that while the proportion of workers using computers has increased from 40% to more than 60% over twenty years, there remain significant differences between countries even within the same occupations. Several countries have seen a significant increase in computer use even in low-skilled occupations generally assumed to be less affected by technology. Overall, the great increase in computer use between 1995 and 2015 has coincided with a period of modest deterioration of job quality in the EU-15 as whole, as discretion declined for most occupational and educational groups while intensity increased slightly for most of them. Our OLS results that exploit variation within country-occupation cells point to a sizeable positive effect of computer use on discretion, but to small or no effect on intensity at work. Our instrumental variable estimates point to an even more benign effect of computer use on job quality. Hence, the results suggest that the (moderate) deterioration in the quality of work observed in the EU-15 between 1995 and 2015 has occurred despite the spread of computers, rather than because of them.

Ofer Malamud, Andreea Mitrut, Cristian Pop-Eleches, NBER: The Effect of Education on Mortality and Health: Evidence from a Schooling Expansion in Romania. This paper examines a schooling expansion in Romania which increased educational attainment for successive cohorts born between 1945 and 1950. We use a regression discontinuity design at the day level based on school entry cutoff dates to estimate impacts on mortality with 1994-2016 Vital Statistics data and self-reported health with 2011 Census data. We find that the schooling reform led to significant increases in years of schooling and changes in labor market outcomes but did not affect mortality or self-reported health. These estimates provide new evidence for the causal relationship between education and mortality outside of high-income countries and at lower margins of educational attainment.

Michael Sinkinson, Amanda Starc, Econofact: Could Drug Ads Have Positive Side Effects? The United States is one of only two countries in the world where it is legal for pharmaceutical companies to advertise their products directly to consumers. Drug ads are expensive and pharmaceutical companies are spending hefty sums advertising certain drugs. Evidence indicates that such advertising does indeed lead to increases in drug sales, some of which happen at the expense of a competitor's product. But, by expanding the patient population, advertising can also lead to social benefits. A consumer that starts taking statins is much less likely to have a heart attack. And heart attacks are expensive to treat. We find that the benefits of getting these patients on statins far outweigh the costs of the statin ads themselves and were larger even than the costs of all direct-to-consumer drug advertising added together in the year of our study.

David Slusky, Richard J. Zeckhauser. NBER: Sunlight and Protection Against Influenza. Recent medical literature suggests that vitamin D supplementation protects against acute respiratory tract infection. Humans exposed to sunlight produce vitamin D directly. This paper investigates how differences in sunlight, as measured over several years within states and during the same calendar month, affect influenza incidence. We find that sunlight strongly protects against influenza. This relationship is driven by sunlight in late summer and early fall, when there are sufficient quantities of both sunlight and influenza activity. A 10% increase in relative sunlight decreases the influenza index in September by 3 points on a 10-point scale. This effect is far greater than the effect of vitamin D supplementation in randomized trials, a differential due to broad exposure to sunlight, hence herd immunity. We also find suggestive evidence, consistent with herd immunity theory, that the protective sunlight effect is strongest with a middle level of population density.

Christopher D. Gardner et al., JAMA: Effect of Low-Fat vs Low-Carbohydrate Diet on 12-Month Weight Loss in Overweight Adults and the Association With Genotype Pattern or Insulin Secretion. The DIETFITS Randomized Clinical Trial. What is the effect of a healthy low-fat (HLF) diet vs a healthy low-carbohydrate (HLC) diet on weight change at 12 months and are these effects related to genotype pattern or insulin secretion? In this randomized clinical trial among 609 overweight adults, weight change over 12 months was not significantly different for participants in the HLF diet group (−5.3 kg) vs the HLC diet group (−6.0 kg), and there was no significant diet-genotype interaction or diet-insulin interaction with 12-month weight loss. There was no significant difference in 12-month weight loss between the HLF and HLC diets, and neither genotype pattern nor baseline insulin secretion was associated with the dietary effects on weight loss.