Goldman School of Public Policy Working Paper (October 2014)
The United States faces a range of economic risks from global climate change — from increased flooding and storm damage, to climate-driven changes in crop yields and labor productivity, to heat-related strains on energy and public health systems. The American Climate Prospectus (ACP) provides a groundbreaking new analysis of these and other climate risks by region of the country and sector of the economy. By linking state-of-the-art climate models with econometric research of human responses to climate variability and cutting edge private sector risk assessment tools, the ACP offers decision-makers a data driven assessment of the specific risks they face.
The ACP is the result of an independent assessment of the economic risks of climate change commissioned by the Risky Business Project. In conducting this assessment, RHG convened a research team, co-led by climate scientist Dr. Robert Kopp of Rutgers University and economist Dr. Solomon Hsiang of the University of California, Berkeley, and partnered with Risk Management Solutions (RMS), the world’s largest catastrophe-modeling company for insurance, reinsurance, and investment-management companies. The team’s research methodology and draft work was reviewed by an Expert Review Panel (ERP) composed of leading climate scientists and economists, acknowledged within the report.
Goldman School of Public Policy Working Paper (October 2014)
Until recently, neither climate nor conflict have been core areas of inquiry within economics, but there has been an explosion of research on both topics in the past decade, with a particularly large body of research emerging at their intersection. In this review, we survey this literature on the interlinkages between climate and conflict, by necessity drawing from both economics and other disciplines given the inherent interdisciplinarity of research in this field. We consider many types of human conflict in the review, including both interpersonal conflict - such as domestic violence, road rage, assault, murder, and rape - and intergroup conflict - including riots, ethnic violence, land invasions, gang violence, civil war, and other forms of political instability, such as coups. We discuss the key methodological issues in estimating causal relationships in this area, and largely focus on "natural experiments" that exploit variation in climate variables over time, helping to address omitted variable bias concerns. After harmonizing statistical specifications and standardizing estimated effect sizes within each conflict category, we carry out a hierarchical meta-analysis that allows us to estimate the mean effect of climate variation on conflict outcomes as well as to quantify the degree of variability in this effect size across studies. Looking across 55 studies, we find that deviations from moderate temperatures and precipitation patterns systematically increase the risk of conflict, often substantially, with average effects that are highly statistically significant. We find that contemporaneous temperature has the largest average effect by far, with each 1σ increase toward warmer temperatures increasing the frequency of contemporaneous interpersonal conflict by 2.4% and of intergroup conflict by 11.3%, but that 2-period cumulative effect of rainfall on intergroup conflict is also substantial (3.5%/σ). We also quantify heterogeneity in these effect estimates across settings that is likely important. We conclude by highlighting remaining challenges in this field and the approaches we expect will be most effective at solving them, including identifying mechanisms that link climate to conflict, measuring the ability of societies to adapt to climate changes, and understanding the likely impacts of future global warming.
Experimental Evidence on Distributional Impacts of Head Start [Revise and resubmit, Journal of Political Economy]
Goldman School of Public Policy Working Paper (August 2014)
This study provides the first comprehensive analysis of the distributional effects of Head Start, using the first national randomized experiment of the Head Start program (the Head Start Impact Study). We examine program effects on cognitive and non-cognitive outcomes and explore the heterogeneous effects of the program through 1st grade by estimating quantile treatment effects under endogeneity (IV-QTE) as well as various types of subgroup mean treatment effects and two-stage least squares treatment effects. We find that (the experimentally manipulated) Head Start attendance leads to large and statistically significant gains in cognitive achievement during the pre-school period and that the gains are largest at the bottom of the distribution. Once the children enter elementary school, the cognitive gains fade out for the full population, but importantly, cognitive gains persist through 1st grade for some Spanish speakers. These results provide strong evidence in favor of a compensatory model of the educational process. Additionally, our findings of large effects at the bottom are consistent with an interpretation that the relatively large gains in the well-studied Perry Preschool Program are in part due to the low baseline skills in the Perry study population. We find no evidence that the counterfactual care setting plays a large role in explaining the differences between the HSIS and Perry findings.
Goldman School of Public Policy Working Paper (July 2014)
A comment by Buhaug et al. attributes disagreement between our recent analyses and their review articles to biased decisions in our meta-analysis and a difference of opinion regarding statistical approaches. The claim is false. Buhaug et al.’s alteration of our metaanalysis misrepresents findings in the literature, makes statistical errors, misclassifies multiple studies, makes coding errors, and suppresses the display of results that are consistent with our original analysis. We correct these mistakes and obtain findings in line with our original results, even when we use the study selection criteria proposed by Buhaug et al. We conclude that there is no evidence in the data supporting the claims raised in Buhaug et al.
The Causal Effect of Environmental Catastrophe on Long-Run Economic Growth: Evidence from 6,700 Cyclones
Goldman School of Public Policy Working Paper (July 2014)
Does the environment have a causal effect on economic development? Using meteorological data, we reconstruct every country's exposure to the universe of tropical cyclones during 1950-2008. We exploit random within-country year-to-year variation in cyclone strikes to identify the causal effect of environmental disasters on long-run growth. We compare each country's growth rate to itself in the years immediately before and after exposure, accounting for the distribution of cyclones in preceding years. The data reject hypotheses that disasters stimulate growth or that short-run losses disappear following migrations or transfers of wealth. Instead, we find robust evidence that national incomes decline, relative to their pre-disaster trend, and do not recover within twenty years. Both rich and poor countries exhibit this response, with losses magnified in countries with less historical cyclone experience. Income losses arise from a small but persistent suppression of annual growth rates spread across the fifteen years following disaster, generating large and significant cumulative effects: a 90th percentile event reduces per capita incomes by 7.4% two decades later, effectively undoing 3.7 years of average development. The gradual nature of these losses render them inconspicuous to a casual observer, however simulations indicate that they have dramatic influence over the long-run development of countries that are endowed with regular or continuous exposure to disaster. Linking these results to projections of future cyclone activity, we estimate that under conservative discounting assumptions the present discounted cost of "business as usual" climate change is roughly $9.7 trillion larger than previously thought.
Goldman School of Public Policy Working Paper: GSPP14-002 (June 2014)
Copyright theorists often ask how incentives can be designed to create better books, movies, and art. But this is not the whole story. As the Roman satirist Martial pointed out two thousand years ago, markets routinely ignore good and even excellent works. The insight reminds us that incentives to find content are just as necessary as incentives to make it. Recent social science research explains why markets fail and how timely interventions can save deserving titles from oblivion. This article reviews society’s long struggle to fix the vagaries of search since the invention of literature. We build on this history to suggest policies for the emerging world of online media.
Homeric literature was produced and disseminated through direct interactions between audiences and authors. Though appealing in many ways, the process was agonizingly slow. By the 1st Century AD commercial publishers had moved to the modern model of charging readers above-cost prices to pay for search and marketing. Crucially, the new model was only sustainable so long as firms could suppress copying. We argue that Roman and early modern publishers developed remarkably successful self-help strategies to do this. However, their methods did little to suppress copying after the first edition. This seemingly modest defect made publishers profoundly risk averse. Ancient best-seller lists were invariably dominated by authors who had been dead for centuries.
Publishers’ self-help systems collapsed under a wave of piracy in the mid-17th Century. This led to the first modern copyright statutes. Crucially, the new laws extended protection beyond the first edition. This encouraged modern business models in which publishers gamble on a dozen titles for each that succeeds. The ensuing proliferation of titles helped fuel the Enlightenment. It also promoted a rich new ecosystem of search institutions including libraries, newspaper critics, and editors.
The Digital Age has changed everything. As copyright fades, the old institutions for finding titles are drying up. We explore several possible responses. First, society can shore up current publishing models by expanding copyright and technical protections. We argue that these methods cannot save book search but might be adequate for music and movies. Second, search engines could pay for editors. We argue that an on-line Digital Bookstore can suppress copyists long enough to fund reasonable search efforts. Finally, society can return to the Homeric pattern of harvesting advice directly from audiences. We explore various commercial and open source institutions for organizing the work.
Goldman School of Public Policy Working Paper: GSPP14-001 (February 2014)
For the past twenty years, large corporations have routinely developed and enforced industry-wide standards to address problems that are only distantly related to earning a profit. This includes writing detailed private regulations for environmental protection, national security, working conditions, and other topics formerly reserved to governments. At the same time, the US Supreme Court has said that the Sherman Act forbids any “extra-governmental agency” that “provides extra-judicial tribunals for the determination and punishment of violations.” This seems to ban enforceable rules. Despite this, many US policymakers continue to argue that private standards are efficient and desirable. Many corporations are sympathetic but fear legal liability and are reluctant to participate unless and until the law is clarified.
This article asks how existing law can be reformed to arrive at principled rules for deciding when private standards violate the Sherman Act. We begin with an historical account of recent private initiatives to regulate food processing, fisheries, forestry, and coffee production. We argue that these private rules are often just as effective – and burdensome – as government regulation. We then generalize from this evidence to explain when and how large corporations are able to impose their preferences through industry-wide standards. We also describe the politics that determines how large corporations use their power. We argue that the need to earn positive profit and defend market share frequently encourages – and sometimes forces – large companies to choose standards that please consumers. In these cases, consumers act as a shadow electorate that constrains private power in much the same way that real voters constrain elected officials. Finally, our examples show that big corporations often decide to share power with smaller rivals, suppliers, NGOs, and other stakeholders. We argue that these delegations are genuine and make private standards more accountable.
The article concludes by asking how current law can be reformed. We argue that the Sherman Act serves two goals. The first is economic efficiency. We argue that private standards advance this goal by addressing problems (“externalities”) that lack well-defined market prices. We argue that private bodies should be allowed to address such problems in the first instance knowing that government may later step in to change or supplement policy. The second goal is to protect democracy from private power. We argue that this danger is minimal so long as (a) market structure encourages corporations to make choices that please consumers and other shadow electorates, (b) the standard setting body represents a wide range of affected stakeholders, or (c) industry selects the prevailing standard from multiple competing proposals. Significantly, all of these tests can be determined from objective evidence without obscure metaphysical inquiries into when private power becomes “illegitimate” or “poses a threat” to democratic politics.
Goldman School of Public Policy Working Paper (February 2014)
Despite unprecedented extensions of available unemployment insurance (UI) benefits during the “Great Recession” of 2007-09 and its aftermath, large numbers of recipients exhausted their maximum available UI benefits prior to finding new jobs. Using SIPP panel data and an event study regression framework, we examine the household income patterns of individuals whose jobless spells outlast their UI benefits, comparing the periods following the 2001 and 2007-09 recessions. Job loss reduces household income roughly by half on average, and for UI recipients benefits replace just under half of this loss. Accordingly, when benefits end the household loses UI income equal to roughly one-quarter of total pre-separation household income (and about one-third of pre-exhaustion household income). Only a small portion of this loss is offset by increased income from food stamps and other safety net programs. The share of families with income below the poverty line nearly doubles. These patterns were generally similar following the 2001 and 2007-09 recessions and do not vary dramatically by household age or income prior to job loss.