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Monday NBER papers

"Beyond GDP? Welfare across Countries and Time," by Charles I. Jones and Peter J. Klenow:

We propose a simple summary statistic for a nation's flow of welfare, measured as a consumption equivalent, and compute its level and growth rate for a broad set of countries. This welfare metric combines data on consumption, leisure, inequality, and mortality. Although it is highly correlated with per capita GDP, deviations are often economically significant: Western Europe looks considerably closer to U.S. living standards, emerging Asia has not caught up as much, and many African and Latin American countries are farther behind due to lower levels of life expectancy and higher levels of inequality. In recent decades, rising life expectancy boosts annual growth in welfare by more than a full percentage point throughout much of the world. The notable exception is sub-Saharan Africa, where life expectancy actually declines.

"The Effects of College Counseling on High-Achieving, Low-Income Students," by Christopher Avery:

This paper reports the results of a pilot study, using a randomized controlled trial to provide college counseling to high-achieving students from relatively poor families. We followed 107 high school seniors through the college admissions process in 2006-2007; we selected 52 of these students at random, offering them ten hours of individualized college advising with a nearby college counselor. The counseling had little or no effect on college application quality, but does seem to have influenced the choice of where the students applied to college. We estimate that students offered counseling were 7.9 percentage points more likely than students not offered counseling to enroll in colleges ranked by Barron’s as “Most Competitive”, though this effect was not statistically significant. More than one-third of the students who accepted the offer of counseling did not follow through on all of the advice they received. Going beyond the framework of the randomized experiment, our statistical analysis suggests that counseling would have had approximately twice as much effect if all students matched with counselors had followed the advice of the counselors.

"Financing Direct Democracy: Revisiting the Research on Campaign Spending and Citizen Initiatives," by John M. de Figueiredo, Chang Ho Ji and Thad Kousser:

The conventional view in the direct democracy literature is that spending against a measure is more effective than spending in favor of a measure, but the empirical results underlying this conclusion have been questioned by recent research. We argue that the conventional finding is driven by the endogenous nature of campaign spending: initiative proponents spend more when their ballot measure is likely to fail. We address this endogeneity by using an instrumental variables approach to analyze a comprehensive dataset of ballot propositions in California from 1976 to 2004. We find that both support and opposition spending on citizen initiatives have strong, statistically significant, and countervailing effects. We confirm this finding by looking at time series data from early polling on a subset of these measures. Both analyses show that spending in favor of citizen initiatives substantially increases their chances of passage, just as opposition spending decreases this likelihood.

"The Effects of Fiscal Stimulus: Evidence from the 2009 'Cash for Clunkers' Program," by Atif Mian and Amir Sufi:

A key rationale for fiscal stimulus is to boost consumption when aggregate demand is perceived to be inefficiently low. We examine the ability of the government to increase consumption by evaluating the impact of the 2009 “Cash for Clunkers” program on short and medium run auto purchases. Our empirical strategy exploits variation across U.S. cities in ex-ante exposure to the program as measured by the number of “clunkers” in the city as of the summer of 2008. We find that the program induced the purchase of an additional 360,000 cars in July and August of 2009. However, almost all of the additional purchases under the program were pulled forward from the very near future; the effect of the program on auto purchases is almost completely reversed by as early as March 2010 – only seven months after the program ended. The effect of the program on auto purchases was significantly more short-lived than previously suggested. We also find no evidence of an effect on employment, house prices, or household default rates in cities with higher exposure to the program.

"Did France Cause the Great Depression?" by Douglas A. Irwin:

The gold standard was a key factor behind the Great Depression, but why did it produce such an intense worldwide deflation and associated economic contraction? While the tightening of U.S. monetary policy in 1928 is often blamed for having initiated the downturn, France increased its share of world gold reserves from 7 percent to 27 percent between 1927 and 1932 and effectively sterilized most of this accumulation. This “gold hoarding” created an artificial shortage of reserves and put other countries under enormous deflationary pressure. Counterfactual simulations indicate that world prices would have increased slightly between 1929 and 1933, instead of declining calamitously, if the historical relationship between world gold reserves and world prices had continued. The results indicate that France was somewhat more to blame than the United States for the worldwide deflation of 1929-33. The deflation could have been avoided if central banks had simply maintained their 1928 cover ratios.

"The Unexpected Long-Run Impact of the Minimum Wage: An Educational Cascade," by Richard Sutch:

Neglected, but significant, the long-run consequence of the minimum wage – which was made national policy in the United States in 1938 – is its stimulation of capital deepening. This took two forms. First, the engineered shortage of low-skill, low-paying jobs induced teenagers to invest in additional human capital – primarily by extending their schooling – in an attempt to raise their productivity to the level required to gain employment. Second, employers faced with an inability to legally hire low-wage workers, rearranged their production processes to substitute capital for low-skill labor and to innovate new technologies. This paper explores the impact of the minimum wage on enrollments between 1950 and 2003. I describe an upward ratcheting mechanism which triggers an “educational cascade.” My estimate is that the average number of years of high school enrollment would have risen to only 3.5 years, rather than 3.7 years, for men born in 1951. Thereafter, enrollment rates would have trended down to about 3.2 years for the cohort born in 1986, rather than slowly rising to around 3.9 years. The cumulative effect of the minimum wage increases beginning in 1950 was to add 0.7 years to the average high school experience of men born in 1986.

By Ezra Klein  |  September 13, 2010; 11:24 AM ET
Categories:  Economics  
Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   StumbleUpon   Technorati   Google Buzz   Previous: Will this table prevent the next financial crisis?
Next: On tax cuts, Democrats win, deficit loses


A Google or Google Scholar search on the title will usually yield a free download of these papers (or working paper versions), which is probably more valuable for readers. Of course, anyone with an interest in the papers probably already knows that.

Examples include

Posted by: bdballard | September 13, 2010 11:40 AM | Report abuse

"First, the engineered shortage of low-skill, low-paying jobs"

Since ~1/4 of teenagers still can't find jobs, maybe we suspend the "engineered shortage of low-paying jobs"?

By the way, it is an interesting result. Low wage jobs are restricted so much that, on balance, the encouragement to stay in school due to job scarcity more than offsets the impact of the minimum wage of increasing the earnings of employed low skill workers.

Posted by: justin84 | September 13, 2010 12:06 PM | Report abuse

Proposed alternative abstract for Avery's "The Effects of College Counseling on High-Achieving, Low-Income Students": teenagers from lower-income families are equally likely to ignore advice from relevant adults and to exhibit laziness as teenagers from higher-income families.

Posted by: JJenkins2 | September 13, 2010 1:35 PM | Report abuse

I used to do volunteer counseling for talented high school students whose parents had never been to college. I truly believe that the biggest obstacle for these kids is complete lack of familiarity with the admissions process. When I began this volunteer effort, I didn't get the students until the beginning of their senior year, and had my hands full just getting their applications and essays and FAFSA forms done. As years went by, I was able to work with school administration, teachers, and counselors to put together a cohesive strategy for getting these kids to college.

Beginning with 9th grade English class, the students created a resume and updated it each year as an English assignment. The school paid for all sophomores and juniors to take the PSAT, and provided prep classes during homeroom and transportation to the test. Our state has common essay questions and a common application for all public universities and community colleges, and the first assignment of senior English was to select and write one of the common application essays, and to practice completing the application.

It worked. We had lots and lots of students get into college. And it's not even hard to do or cost much money. I don't know why every high school doesn't do it.

Posted by: bgmma50 | September 13, 2010 2:30 PM | Report abuse

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