Machine Learning and Randomized Controlled Trials:
Advancing Empirical Research by Integrating Methods
Randomized controlled trials and machine learning are among the most important methods adopted by empirical researchers in recent years. In a Master Lecture delivered as part of the Development Economics Program meeting at the 2018 NBER Summer Institute, Esther Duflo of MIT and the NBER describes how taking both, in combination, can improve the predictive power of models and also advance understanding of causal mechanisms. At the same meeting, Pinelopi K. Goldberg of Yale University delivered a Master Lecture on linkages between trade policy and competition policy from the perspective of firms in developing countries.
New Volumes in NBER Book Series Feature Studies
of Macroeconomics, and Tax Policy and the Economy
Volume 32 of the NBER Macroeconomics Annual, edited by Martin Eichenbaum and Jonathan A. Parker, features six theoretical and empirical studies in contemporary macroeconomics, and a keynote address by former IMF chief economist Olivier Blanchard on which distortions are central to understanding short-run macroeconomic fluctuations. In one study, SeHyoun Ahn, Greg Kaplan, Benjamin Moll, Thomas Winberry, and Christian Wolf examine the dynamics of consumption expenditures in non-representative-agent macroeconomic models. In another, John Cochrane asks which macro models most naturally explain the coexistence of low and nonvolatile inflation rates, near-zero short-term interest rates, and an explosion in monetary aggregates in the post-financial-crisis macroeconomic environment. Manuel Adelino, Antoinette Schoar, and Felipe Severino examine the causes of the lending boom that precipitated the recent U.S. financial crisis and Great Recession. Steven Durlauf and Ananth Seshadri investigate whether increases in income inequality cause lower levels of economic mobility and opportunity. Charles Manski explores the formation of expectations, considering the efficacy of directly measuring beliefs through surveys as an alternative to making the assumption of rational expectations. In the final research paper, Efraim Benmelech and Nittai Bergman analyze the sharp declines in debt issuance and the evaporation of market liquidity that coincide with most financial crises.
The six research studies in Volume 32 of Tax Policy and the Economy, edited by Robert A. Moffitt, analyze the U.S. tax and transfer system's effects on revenues, expenditures, and economic behavior. James Andreoni weighs the effects of tax-free charitable funds on donations against their tax costs. Caroline Hoxby analyzes the use of tax credits by students enrolled in online post-secondary education. Alex Rees-Jones and Dmitry Taubinsky explore taxpayers’ psychological biases that lead to incorrect perceptions and understanding of tax incentives. Jeffrey Clemens and Benedic Ippolito investigate the implications of block grant reforms of Medicaid for receipt of federal support by different states. Andrew Samwick examines means-testing of Medicare and federal health benefits under the Affordable Care Act. Bruce Meyer and Wallace Mok study the incidence and effects of disability among U.S. women from 1968 to 2015, examining the impacts of disability on income, consumption, and public transfers.
Around 59 percent of all non-financial corporations in Massachusetts had a bank director on their board in 1872. Eric Hilt finds that these firms were more likely to survive the recession of the 1870s and experienced less of a deterioration in their credit ratings than competitors. This supports the important role of credit access in explaining firm performance.
In the presence of occupational licensing, research by Peter Q. Blair and Bobby W. Chung shows, firms rely less on observable characteristics such as race and gender in determining employee wages. Licensed minorities and women experience smaller wage gaps than their unlicensed peers.
In a field experiment in India, Aaron Chatterji, Solène Delecourt, Sharique Hasan, and Rembrand M. Koning find that the firms of entrepreneurs advised to take an active approach to people management grew 28 percent larger and were 10 percentage points less likely to fail than firms advised to take a passive approach.
When foreign firms set up joint ventures in China, many Chinese firms in the same industry that are not involved in the new ventures gain new technology and become more productive, especially if the foreign partner is from the United States, according to a study featured in the August issue of The NBER Digest. Also in this edition of the monthly Digest, studies examining the relationship between early Social Security claiming and elder poverty, documentation of a link between forced migration and family values, an association of hotter school days with lower academic achievement, and an evaluation of the role of credit ratings in the 2008 financial crisis, and analyzing the impact of broader global market access on manufacturing firms.
Implicit taxes on work at older ages can be remarkably large as a result of the way Social Security retirement and disability programs and Medicare are set up, researchers write in the current edition of The NBER Reporter, and alternative policies could have a large impact on labor supply. Other articles in the quarterly Reporter include an analysis of the rapidly shrinking number of firms listed on U.S. stock exchanges, a report on the effects of gender imbalance on saving behaviors within families and in the broader economy, an examination of firm behaviors in reaction to changes in the competitive environment, and a summary of asset pricing research in the aftermath of the Great Recession.
Growing emergency department (ED) wait times are increasingly a focus of public concern. Research summarized in the current edition of the NBER's Bulletin on Aging and Health studies the effects of a policy in England requiring that 95 percent of ED patients be discharged, admitted as an inpatient, or transferred to another hospital within four hours of arrival. The study finds a modest increase in ED costs due to the policy, and a reduction in the 30-day patient mortality rate of an estimated 14 percent.
Raghuram Rajan, in 10th Annual Feldstein Lecture,
Analyzes Role of Liquidity in Recent Financial Crisis
Raghuram Rajan of the University of Chicago and NBER recently delivered the Martin Feldstein Lecture at the NBER Summer Institute. A former governor of the Reserve Bank of India and chief economist of the International Monetary Fund, Rajan analyzed the 2007-09 financial crisis through a consideration of reactions to either excess or insufficient liquidity in the markets. "When you see a combination of high credit growth and rising asset prices, you should be screaming ‘Fire!’" he said, but herd behavior in the credit market keeps the good times going, while expectations of illiquidity "can lead to frozen markets and credit" as herd behavior in the opposite direction exaggerates downturns.