MARS 23 2018

David Bholat, James Brookes, BoE: Laying bare linguistic patterns in PRA messages using machine learning. In a recent research paper, we show that the way supervisors write to banks and building societies (hereafter ‘banks’) has changed since the financial crisis. Supervisors now adopt a more directive, forward-looking, complex and formal style than they did before the financial crisis. We also show that their language and linguistic style is related to the nature of the bank. For instance, banks that are closest to failure get letters that have a lot of risk-related language in them. In this blog, we discuss the linguistic features that most sharply distinguish different types of letters, and the machine learning algorithm we used to arrive at our conclusions.

Neil Irwin, NYT: Globalization’s Backlash Is Here, at Just the Wrong Time. The M.I.T. economist David Autor and colleagues have done extensive work showing that the “China shock” that ensued with that country’s entry into the World Trade Organization caused lasting pain to communities in the United States that competed with Chinese companies in making a range of manufactured goods. Even as those effects linger, he sees the risks involved in commerce with China as shifting elsewhere. “The China shock on large-scale manufacturing and its mass employment effects, that part is largely behind us,” Mr. Autor said. Now, the challenge is Chinese competition on more technologically complex products, like automobiles, airplanes or microprocessors. The manufacturing of more labor-intensive, less technologically complex products like apparel is migrating to lower-wage countries like Bangladesh and Ethiopia.

Daron Acemoglu, Pascual Restrepo, NBER: Demographics and Automation. We argue theoretically and document empirically that aging leads to greater (industrial) automation, and in particular, to more intensive use and development of robots. Using US data, we document that robots substitute for middle-aged workers (those between the ages of 36 and 55). We then show that demographic change—corresponding to an increasing ratio of older to middle-aged workers—is associated with greater adoption of robots and other automation technologies across countries and with more robotics-related activities across US commuting zones. We also provide evidence of more rapid development of automation technologies in countries undergoing greater demographic change. Our directed technological change model further predicts that the induced adoption of automation technology should be more pronounced in industries that rely more on middle-aged workers and those that present greater opportunities for automation. Both of these predictions receive support from country-industry variation in the adoption of robots. Our model also implies that the productivity implications of aging are ambiguous when technology responds to demographic change, but we should expect productivity to increase and labor share to decline relatively in industries that are most amenable to automation, and this is indeed the pattern we find in the data.

Lukas Kießling, Jonas Radbruch, Sebastian Schaube, IZA: The Impact of Self-Selection on Performance. In many natural environments, carefully chosen peers influence individual behavior. In this paper, we examine how self-selected peers affect performance in contrast to randomly assigned ones. We conduct a field experiment in physical education classes at secondary schools. Students participate in a running task twice: first, the students run alone, then with a peer. Before the second run,we elicit preferences for peers. We experimentally vary the matching in the second run and form pairs either randomly or based on elicited preferences. Self-selected peers improve individual performance by .14-.15 SD relative to randomly assigned peers. While self-selection leads to more social ties and lower performance differences within pairs, this altered peer composition does not explain performance improvements. Rather, we provide evidence that self-selection has a direct effect on performance and provide several markers that the social interaction has changed.

Marco Francesconi, Matthias Parey, IZA: Early Gender Gaps among University Graduates. We use data from six cohorts of university graduates in Germany to assess the extent of gender gaps in college and labor market performance twelve to eighteen months after graduation. Men and women enter college in roughly equal numbers, but more women than men complete their degrees. Women enter college with slightly better high school grades, but women leave university with slightly lower marks. Immediately following university completion, male and female full-timers work very similar number of hours per week, but men earn more than women across the pay distribution, with an unadjusted gender gap in full-time monthly earnings of about 20 log points on average. Including a large set of controls reduces the gap to 5-10 log points. The single most important proximate factor that explains the gap is field of study at University.

Orsetta Causa, Mikkel Hermansen, VOX: Income redistribution through taxes and transfers across OECD countries. Growing wealth inequality has become a key concern for economists, and tackling it requires a deep understanding of how tax and transfer systems affect the income distribution. Using OECD data, this column argues that taxes and transfers are less effective at reducing inequality today than they were in the mid-1990s. This drop in effectiveness has largely been driven by declining cash transfers, with a smaller, more heterogeneous role for personal income taxes.

Jessica Irvine, The Sydney Morning Herald: The evidence is in: first-born siblings are better. That’s right. New findings from large scale population surveys reveal that not only are first-born children more intelligent, they have better personalities, are more likely to be employed, earn higher incomes and have better mental health. But it’s not all roses. The stress of being so awesome also means first-borns have higher blood pressure and are more likely to be overweight. A small price to pay, perhaps, for their innate superiority.

Alex Hoagland, Trevor Woolley, Brigham Young University: It's No Accident: Evaluating the Effectiveness of Vehicle Safety Inspections. Traffic fatalities have fallen steadily over the past two decades, particularly those due to car failure. Many have attributed this fall to safer vehicle technology. This trend has led many states to reevaluate mandatory vehicle safety inspection programs. In 2009 and 2010, New Jersey and Washington, D.C. ended their programs, opening a perfect window for analysis. We use New Jersey, a repeal state, to test whether repeal leads to more accidents. Using a synthetic control methodology and precise data on fatal accident rates from throughout the United States, we conclude that removing the requirements resulted in no significant increases in any of traffic fatalities per capita, traffic fatalities due specifically to car failure per capita, or the frequency of accidents due to car failure. Therefore, we conclude that vehicle safety inspections do not represent an efficient use of government funds, and do not appear to have any significantly mitigating effect on the role of car failure in traffic accidents.