Wages are lower in agriculture than in other sectors. Moreover, cross-country evidence suggests that this wage gap is higher in poorer countries. Using a panel data set on the universe of formal workers in Brazil, I use information on workers that switch sectors to decompose the drivers of this inter-sector gap. I find that most of the gap between sectors is explained by unobservable differences in the skill composition of workers, as opposed to differential pay of workers with similar skills. The evidence favors recently proposed Roy models of inter-sector sorting as drivers of lower average wages in agriculture. A calibrated model of worker sorting can account for 66% of the wage gap observed in 1996 Brazil and a share of both the wage gap decline and the diminishing worker participation in agriculture observed during the period between 1996 and 2013.
I explore some implications that my argument in "Conditional Reasons and the Procreation Asymmetry" has for questions of individual procreation. I discuss and reject an argument due to David Benatar (2006), according to which affirming the Procreation Asymmetry commits us to recognizing a prima facie obligation against having any children. More challenging is the following problem, which I term “the problem of procreative risk”: In every act of procreation, there is some small risk of creating a person whose life is not worth living. Does this empirical fact, together with the Procreation Asymmetry, commit us to the view that procreating is a moral risk that is rarely justifiable? Consider: if we procreate then, in the best case, we bring about an outcome (namely that in which a new happy person is created) that, according to the Asymmetry, we have no positive moral reason for bringing about. But in the worst case, we bring about an outcome that we have strong moral reason to avoid. Drawing on some of my recent work on the ethics of risk (Frick, 2015b), I argue that even this second challenge can ultimately be met. Affirming the Asymmetry does not, in fact, commit us to anti-natalism.
How effective is the minimum wage at raising nondurable household consumption through the redistribution of income towards poor workers? Using novel data on retail sales by county, I exploit variation in the minimum wage rates across states and over time to answer this question. I find that a 10% increase in the minimum wage increases sales by 1.1%, a surprisingly large number considering that only a tiny fraction of the American labor force earns the federal minimum wage rate. I argue that such a large effect is explained by positive spillovers benefiting the bottom quarter of the labor income distribution. As expected, the expenditure response to minimum wage hikes is stronger in counties where the policy binds more.
An oft-mentioned but under-studied feature of asset price bubbles is a surge of new entrants, retail investors who never invested, joining the bubble because of their friends or neighbors. We incorporate this viral element into an otherwise standard bubble model with forward-looking agents. Optimism spreads across households as an epidemic process and the participation rate rises as new entrants buy, anticipating trending prices. Insiders or institutions gradually sell their shares, generating trading volume and moderating price growth. Our model rationalizes several patterns in the data, which have been previously difficult to explain, including trending prices and volume peaking months before prices, participation rates, and short-selling in both stock market and housing bubbles.
Are civilian attitudes a useful predictor of patterns of violence in civil wars? A prominent debate has emerged among scholars and practitioners about the importance of winning civilian “hearts and minds” for influencing their wartime behavior. We argue that such efforts may have a dark side: insurgents can use pro-counterinsurgent attitudes as cues to select their targets and tactics. We conduct an original survey experiment in 204 Afghan villages to establish a pos- itive association between pro-International Security Assistance Force attitudes and future Taliban attacks. We extend our analysis to 14,606 non-surveyed villages and demonstrate that our measure of civilian attitudes improves out- of-sample predictive performance by 20–30% over a standard forecasting model. The results are especially strong for Taliban attacks with improvised explosive devices. These improvements in predictive power remain even after adjusting for possible confounders, including past violence, military bases, and develop- ment aid.
We quantify the effect of pre-vote deliberation on the decisions of US appellate courts. We estimate a model of strategic voting with incomplete information in which judges communicate before casting their votes, and then compare the probability of mistakes in the court with deliberation with a counterfactual of no pre-vote communication. The model has multiple equilibria, and judges' preferences and information parameters are only partially identifed. We find that deliberation can be useful when judges tend to disagree ex ante and their private information is relatively imprecise; otherwise, it tends to reduce the effectiveness of the court.
Estimating causal interaction effects is essential for the exploration of heterogeneous treatment effects. In the presence of multiple treatment variables with each having several levels, researchers are often interested in identifying the combinations of treatments that induce large additional causal effects beyond the sum of separate effects attributable to each treatment. We show, however, the standard definition of causal interaction effect, typically estimated with the standard linear regression or ANOVA, suffers from the lack of invariance to the choice of baseline condition and the difficulty of interpretation beyond two-way interaction. We propose an alternative definition of causal interaction effect, called the marginal treatment interaction effect, whose relative magnitude does not depend on the choice of baseline condition while maintaining an intuitive interpretation even for higher-order interaction. The proposed approach enables researchers to effectively summarize the structure of causal interaction in high-dimension by decomposing the total effect of any treatment combination into the marginal effects and the interaction effects. We also establish the identification condition and develop an estimation strategy for the proposed marginal treatment interaction effects. Our motivating example is conjoint analysis where the existing literature largely assumes the absence of causal interaction. Given a large number of interaction effects, we apply a variable selection method to identify significant causal interaction. Our exploratory analysis of a survey experiment on immigration preferences reveals substantive insights the standard conjoint analysis fails to discover.
In this paper, we show that the design and decentralized, school-based scoring of New York's high school exit exams - the Regents Examinations - led to the systematic manipulation of test sores just below important proficiency cutoffs. Our estimates suggest that teachers inflate approximately 40 percent of test scores near the proficiency cutoffs. Teachers are more likely to inflate the scores of high-achieving students on the margin, but low-achieving students benefit more from manipulation in aggregate due to the greater density of these students near the proficiency cutoffs. Exploiting a series of reforms that eliminated score manipulation, we find that inflating a student's score to fall just above a cutoff increases his or her probability of graduating from high school by 27 percent. These results have important implications for educational attainment of marginal high school graduates. For example, we estimate that the black-white graduation gap would have been about 5 percent larger in the absence of test score manipulation.
Scholars have attributed the first wave of the East Asian economic miracle to a model of state-led industrialization known as the developmental state. This paper argues that this development strategy originated in the international politics of the Cold War. Using historical case studies based on archival research, I argue that a developmental state emerges whenever a superpower successfully defends a country in its sphere of influence against a long-term threat from its geopolitical rival that is initiated by a crisis. I focus on American national security policy in the early Cold War and argue that this configuration of threat led the United States to play a decisive role in the emergence of the developmental state on Taiwan. In contrast, the absence of a severe, long-term threat led the United States to forego supporting the formation of a developmental state in the Philippines.
In domains as distinct as dieting, retirement saving, and work arrangements, people pay for commitment. The canonical β,δ time preference model is often used to justify and explain a generic demand for commitment. However, this model makes sharp, untested predictions about the demand for commitment contracts. In two experiments, we offer contracts to high school students who are studying for final examinations. Students choose a target for performance on each review quiz, and a grading penalty if the chosen target is not achieved. Solving a benchmark version of the β,δ model with a sophisticated agent, we derive several strong predictions that are rejected empirically. Most notably, a majority of students contract for targets that exceed their expected performance: this both raises the likelihood of incurring a penalty, and weakens the grading incentive for study effort. These findings, and other instances of sub-optimal commitment in previous lab and field studies, form an important puzzle for theories of optimal commitment.
We consider a class of dynamic collective action problems in which either a single principal or two competing principals vie for the support of members of a group. We focus on the dynamic problem that emerges when agents' decisions to support an alternative are irreversible, and agents negotiate and commit their support to the principal sequentially. A danger for the agents in this context is that a principal may be able to poach agents to her side by exploiting competition among members of the group. Would agents benet from introducing competition between opposing principals? We show that when the principals' policies provide value to the agents, competition generally reduces agents' welfare. We study applications to endorsements in elections and corporate takeovers.
Do asset managers reach for yield because of competitive pressures in a low rate environment? I propose a tournament model of money market funds (MMFs) to study this issue. I show that funds with different costs of default respond differently to changes in interest rates, and that it is important to distinguish the role of risk-free rates from that of risk premia. In an environment in which funds care about relative performance, an increase in the risk premium leads funds with lower default costs to increase risk-taking, while funds with higher default costs reduce risk-taking. Without changes in the risk premium, low risk-free rates reduce risk-taking. I show that these predictions are consistent with the risk-taking of MMFs during the 2006--2008 period: When risk premia increased, funds with low sponsor's reputation concerns increased risk-taking, while funds with high sponsor's reputation concerns decreased risk-taking. Further, I confirm the differential role of risk-free rate and risk premium to explain changes in fund portfolios.
This paper provides a novel defense of the normative intuition known as the Procreation Asymmetry, according to which there is a strong moral reason not to create a life that will foreseeably not be worth living, but there is no moral reason to create a life just because it would foreseeably be worth living. I investigate how to reconcile the Procreation Asymmetry with our intuitions about another recalcitrant problem case in population ethics: Derek Parfit’s Non-Identity Problem. I show that what has prevented philosophers from developing a theory that gives a satisfactory account of both these problems is their tacit commitment to a teleological conception of well-being, as something to be ‘promoted’. Replacing this picture with one according to which our reasons to confer well-being on people are conditional on their existence allows me to do better. It also enables us to understand some of the deep structural parallels between seemingly disparate normative phenomena such as procreating and promising.