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Volume 105, Issue 12, Dec 2015
1.Title: Market Externalities of Large Unemployment Insurance Extension Programs
Authors: Lalive, Rafael; Landais, Camille; Zweimüller, Josef.
Abstract: We provide evidence that unemployment insurance affects equilibrium conditions in the labor market, which creates significant 'market externalities.' We provide a framework for identification of such equilibrium effects and implement it using the Regional Extension Benefit Program (REBP) in Austria which extended the duration of UI benefits for a large group of eligible workers in selected regions of Austria. We show that non-eligible workers in REBP regions have higher job finding rates, lower unemployment durations, and a lower risk of long-term unemployment. We discuss the implications of our results for optimal UI policy.
2. Title: Feedback Effects, Asymmetric Trading, and the Limits to Arbitrage
Authors: Edmans, Alex; Goldstein, Itay; Jiang, Wei
Abstract: We analyze strategic speculators' incentives to trade on information in a model where firm value is endogenous to trading, due to feedback from the financial market to corporate decisions. Trading reveals private information to managers and improves their real decisions, enhancing fundamental value. This feedback effect has an asymmetric effect on trading behavior: it increases (reduces) the profitability of buying (selling) on good (bad) news. This gives rise to an endogenous limit to arbitrage, whereby investors may refrain from trading on negative information. Thus, bad news is incorporated more slowly into prices than good news, potentially leading to overinvestment.
3. Title: A Seniority Arrangement for Sovereign Debt
Authors: Chatterjee, Satyajit; Eyigungor, Burcu
Abstract: A sovereign's inability to commit to a course of action regarding future borrowing and default behavior makes long-term debt costly (the problem of debt dilution). One mechanism to mitigate this problem is the inclusion of a seniority clause in debt contracts. In the event of default, creditors are to be paid off in the order in which they lent (the 'absolute priority' or 'first-in-time' rule). In this paper, we propose a modification of the absolute priority rule suited to sovereign debts contracts and analyze its positive and normative implications within a quantitatively realistic model of sovereign debt and default.
4. Title: The Housing Market Impacts of Shale Gas Development
Authors: Muehlenbachs, Lucija; Spiller, Elisheba; Timmins, Christopher
Abstract: Using data from Pennsylvania and an array of empirical techniques to control for confounding factors, we recover hedonic estimates of property value impacts from nearby shale gas development that vary with water source, well productivity, and visibility. Results indicate large negative impacts on nearby groundwater-dependent homes, while piped-water-dependent homes exhibit smaller positive impacts, suggesting benefits from lease payments. Results have implications for the debate over regulation of shale gas development.
5. Title: Imported Inputs and Productivity
Authors: Halpern, László; Koren, Miklós; Szeidl, Adam
Abstract: We estimate a model of importers in Hungarian microdata and conduct counterfactual analysis to investigate the effect of imported inputs on productivity. We find that importing all input varieties would increase a firm's revenue productivity by 22 percent, about one-half of which is due to imperfect substitution between foreign and domestic inputs. Foreign firms use imports more effectively and pay lower fixed import costs. We attribute one-quarter of Hungarian productivity growth during the 1993-2002 period to imported inputs. Simulations show that the productivity gain from a tariff cut is larger when the economy has many importers and many foreign firms.
6. Title: Capital Tax Reform and the Real Economy: The Effects of the 2003 Dividend Tax Cut
Authors: Yagan, Danny
Abstract: This paper tests whether the 2003 dividend tax cut-one of the largest reforms ever to a US capital tax rate-stimulated corporate investment and increased labor earnings, using a quasi-experimental design and US corporate tax returns from years 1996-2008. I estimate that the tax cut caused zero change in corporate investment and employee compensation. Economically, the statistical precision challenges leading estimates of the cost-of-capital elasticity of investment, or undermines models in which dividend tax reforms affect the cost of capital. Either way, it may be difficult to implement an alternative dividend tax cut that has substantially larger near-term effects.
7. Title: R&D, International Sourcing, and the Joint Impact on Firm Performance
Authors: Bøler, Esther Ann; Moxnes, Andreas; Ulltveit-Moe, Karen Helene
Abstract: This paper studies the impact of an R&D cost shock on R&D investments, imported inputs, and their joint impact on firm performance. We introduce imported inputs into a model of R&D and endogenous productivity, and show that R&D and international sourcing are complementary activities. Exploiting the introduction of an R&D tax credit in Norway in 2002, we find that cheaper R&D stimulated not only R&D investments but also imports of intermediates, quantitatively consistent with the model. An implication of our work is that improved access to imported inputs promotes R&D investments and, ultimately, technological change.
8. Title: Media Influences on Social Outcomes: The Impact of MTV's 16 and Pregnant on Teen Childbearing
Authors: Kearney, Melissa S.; Levine, Phillip B.
Abstract: This paper explores the impact of the introduction of the widely viewed MTV reality show 16 and Pregnant on teen childbearing. Our main analysis relates geographic variation in changes in teen childbearing rates to viewership of the show. We implement an instrumental variables (IV) strategy using local area MTV ratings data from a pre-period to predict local area 16 and Pregnant ratings. The results imply that this show led to a 4.3 percent reduction in teen births. An examination of Google Trends and Twitter data suggest that the show led to increased interest in contraceptive use and abortion.
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