Research
Summary of the recent paper coauthored by ISFE Director Charles Courtemanche.
Abstract:
Economic systems are described by the manner that property rights are allocated to individuals, to the government, or to interests groups. Property rights entail control of use of assets, claim on the net income from an asset, and transferability of the previous two. How they are allocated characterizes an economic system (e.g., capitalism, socialism) and determines its success or failure. A related analysis is important to understanding the success or failure of business organization, e.g., the corporate and non-corporate form, franchising, and employee compensation methods.
This chapter examines trends in Medicaid enrollment across the income distribution after the ACA’s Medicaid expansion. Using data from the American Community Survey between 2012 and 2017, we compare Medicaid coverage over time in 9 states that expanded Medicaid in 2014 with no previous expansion for able-bodied, working-age adults with 12 states that had not expanded Medicaid by 2019 and also had no previous expansion for such adults. A difference-in-differences model is used to formalize this comparison.
Long-term federal budget forecasts show sizable increases in federal spending in the coming decades. A large share of this increase in spending is due to Social Security and Medicare. Some of this is due simply to the growth in the eligible population but is some due to growth in spending per beneficially. Our finding show that each accounts for sizable shares of the growth. Thus, there is room to limit benefits without cutting them and still constrain spending growth. .
We study the effects of traditional cigarette tax rate changes and e-cigarette tax adoption on use of these products among US adults. Data are drawn from the Behavioral Risk Factor Surveillance System and National Health Interview Survey data over the period 2011 to 2017. Using a difference-in-differences model, we find that higher traditional cigarette taxes reduce adult traditional cigarette use and increase adult e-cigarette use, suggesting that the products are economic substitutes.
We find that federal workers were consistently paid more than comparable private-sector workers throughout the 1995 to 2017 time period. Moreover, federal works had higher pension and health insurance coverage. For 2017, we estimate that federal workers were paid 12.5% more. If policymakers were able to save 12.5% on federal worker compensation, this translates into roughly $35 billion; approximately the same as the entire budget of the Department of Justice or Department of State.
This study finds a decades-long, substantial rise in national educational funding but only very modest increases in test scores. These imply that productivity, as measured by test score points per dollar of funding, has steadily decreased. Funding variations across states and over time indicate a minimal association of funding to test scores, consistent with the decline in educational productivity.
We show that credit rating agencies can have a significant effect on election outcomes. We identify these effects by exploiting exogenous variation in municipal bond ratings due to Moody’s recalibration of its scale in 2010. We find that incumbent politicians in upgraded municipalities experience an increase in their likelihood of reelection and their vote shares.
/sites/ISFE/files/Schnatter%20Political%20Ratings%20AF%20180628_revised_0.pdf
In response to the ongoing discussion in the literature of the appropriate framework for monetary policy, we compare two of the most frequently discussed alternatives to inflation targeting—targeting either the level of nominal GDP or the price level—within the context of a simple vector autoregressive (VAR) model. Our approach can be considered a constrained-discretion approach. The model is estimated using quarterly data over the period 1979:4-2003:4, a period in which the economy was buffeted by substantial supply and demand shocks.
Technological innovation is a key driver of economic growth. However, innovations usually involve huge upfront costs, and the benefits associated with these innovations are spread across various sectors of society so that the value of these benefits are not easily appropriable by the innovating firm. The positive externalities of fundamental innovations cause individual firms to underinvest in them compared to the socially optimal levels, given the large costs and the limited appropriability of the benefits associated with the innovation.
We show that the assignment of property rights to client relationships affects employee behavior
in the industry for financial advice. Our identification comes from staggered firm-level entry into
the Protocol for Broker Recruiting. The protocol effectively transfers the ownership of the client
relationship from the firm to the employee. We document that entering into the protocol increases
employee labor mobility among member firms. Further, we find that upon protocol inclusion,
This paper studies the impact of globalization on U.S. earnings inequality in the context of rapidly growing import competition from China. The increase in U.S. inequality during 2000-2007 has been driven entirely by changes within regions}. While the existing literature has established differences in wage growth across regions as a consequence of import competition, understanding the impact of globalization on rising U.S. inequality requires then focusing on its impact on inequality within regions.
This study investigates how ownership and/or management affects ambulance services across the United States. We investigate whether ambulance quality, measured by patient transportation time, varies by organization type. We estimate the effect of ownership structure on response time variables using data from the National EMS Information System (NEMSIS) for the years 2010–2015, the most comprehensive data set on emergency medical services.
In order to encourage savings among workers without access to employer-sponsored retirement plans, several states have proposed defaulting workers into state-run individual retirement accounts known as Auto-IRAs. Plans such as OregonSaves automatically enroll workers and, by default, increase their contributions over time. Given low opt-out rates, these policies have the potential to increase retirement savings for workers without access to employer-sponsored plans.
The federal government transfers considerable sums to local governments in the form of intergovernmental grants. With the exception of health and welfare programs, most intergovernmental grants to local governments are classified as discretionary spending. In its annual appropriations process, Congress decides how funding for discretionary spending will be broken up among the various agencies, but more detailed decisions about specific uses of funds are left to the executive branch.
This paper examines the impacts of the Affordable Care Act (ACA) – which substantially increased insurance coverage through regulations, mandates, subsidies, and Medicaid expansions – on behaviors related to future health risks after three years. Using data from the Behavioral Risk Factor Surveillance System and an identification strategy that leverages variation in pre-ACA uninsured rates and state Medicaid expansion decisions, we show that the ACA increased preventive care utilization along several dimensions, but also increased risky drinking.
This research sheds new light on the effects of the Affordable Care Act. During the first two years of the ACA access to health care increased but health outcomes and behaviors remained unchanged, according to findings by Institute Director Yelowitz with coauthors Courtemanche, Marton, Ukert and Zapata. With efforts at the national level to repeal and replace the ACA this research suggests that though access to care may decrease, health outcomes are unlikely to change.
Only one in five Americans trust the United States government to do the right thing most of the time. This is down from three in four Americans in the 1960s. What has led to the erosion of trust? Gordon, Garen and Clark find that the growth in government by politicians who are currying the favors of special interests may play a large role.
Dr. Bradshaw explores today’s political, social and moral divides with reference to the works of John Locke and Jean-Jacques Rousseau. Finding that behind these ideas are destructive forms of thinking and feeling, Bradshaw argues that to unify requires returning to the classical disciplines imbedded in Plato, Aristotle and the Christian ideal of educating the passions.
Kentucky spent over $590 million between 2005 and 2007 on asphalt paving projects. Barrus and Scott analyzed companies’ choices to bid and how much to bid in that period to explore the affect that varying levels of competition had on the price the Commonwealth paid. With a majority of contracts attracting only one bidder these projects cost the Commonwealth between 9.3% and 16.5% more than projects with additional bidders.
As technology becomes more complex, business transactions and accounting standards both become more complex. But do accounting standards need to match the complexity of business transactions? Rusli, Zhao and Ziebart find that accounting standards can be simpler if they rely on market-established prices of relevant assets.
The Great Depression may have been preventable. Using a formalized policy rule instead of relying on the Federal Reserve’s discretionary policy decisions, may have prevented the country’s worst economic crisis. Fackler and Parker analyze what could have happened if the country had adopted Irving Fisher’s recommendations in 1930.
How do corporations—who balance making sales today and planning for the future—respond to regulatory change? Thomaz, Bargeron, Hulland, and Zutter’s study provides evidence that legislative changes, such as Sarbanes-Oxley, can significantly affect a corporation’s priorities. The passage of Sarbanes-Oxley incentivized U.S. corporations to focus more on reaping the immediate gains from marketing rather than investment in research and development.
Why do hedge fund investors feel confident that their money is in good hands despite lax government regulation? Reputation. Clifford, Ellis, and Gerken’s research find strong, market-based incentives for fund managers to hire reputable directors to monitor their funds. And while managers are looking for reputable directors, directors are looking for high quality funds to work for—creating mutual interests for close monitoring and honest dealing.
Does the U.S. tax code push corporations to save more cash abroad? While the desire to fund future investment encourages domestic corporate savings, lower international tax rates encourage U.S. corporations—especially those with intensive research and development programs—to save larger amounts of cash abroad, according to this research by Faulkender, Hankins, and Petersen.
Dr. Yelowitz’s research explores the unintended consequences and individual incentives that arise when the government sets up health insurance markets outside of the free enterprise system. Following the Affordable Care Act expansion, the integrity of the Kentucky Medicaid program may be at risk. This first look finds that 38 percent of Kentucky’s new Medicaid enrollees were not eligible for the program in 2014, according to data from the American Community Survey.