The China Shock: Learning from Labor Market Adjustment to Large Changes in Trade

March 29, 2016
By: David H. Autor ; David Dorn ; Gordon H. Hanson
China’s emergence as a great economic power has induced an epochal shift in patterns of world trade. Simultaneously, it has challenged much of the received empirical wisdom about how labor markets adjust to trade shocks. Alongside the heralded consumer benefits of expanded trade are substantial adjustment costs and distributional consequences. These impacts are most visible in the local labor markets in which the industries exposed to foreign competition are concentrated. Adjustment in local labor markets is remarkably slow, with wages and labor-force participation rates remaining depressed and unemployment rates remaining elevated for at least a full decade after the China trade shock commences. Exposed workers experience greater job churning and reduced lifetime income. At the national level, employment has fallen in U.S. industries more exposed to import competition, as expected, but offsetting employment gains in other industries have yet to materialize. Better understanding when and where trade is costly, and how and why it may be beneficial, are key items on the research agenda for trade and labor economists.
JEL: F14 J23 J31

Partners in Crime: Schools, Neighborhoods and the Formation of Criminal Networks

March 29, 2016
By: Stephen B. Billings ; David J. Deming ; Stephen L. Ross
Why do crime rates differ greatly across neighborhoods and schools? Comparing youth who were assigned to opposite sides of newly drawn school boundaries, we show that concentrating disadvantaged youth together in the same schools and neighborhoods increases total crime. We then show that these youth are more likely to be arrested for committing crimes together – to be “partners in crime”. Our results suggest that direct peer interaction is a key mechanism for social multipliers in criminal behavior. As a result, policies that increase residential and school segregation will – all else equal – increase crime through the formation of denser criminal networks.
JEL: I21 I24

Field Experiments on Discrimination

March 29, 2016
By: Marianne Bertrand ; Esther Duflo
This article reviews the existing field experimentation literature on the prevalence of discrimination, the consequences of such discrimination, and possible approaches to undermine it. We highlight key gaps in the literature and ripe opportunities for future field work. Section 1 reviews the various experimental methods that have been employed to measure the prevalence of discrimination, most notably audit and correspondence studies; it also describes several other measurement tools commonly used in lab-based work that deserve greater consideration in field research. Section 2 provides an overview of the literature on the costs of being stereotyped or discriminated against, with a focus on self-expectancy effects and self-fulfilling prophecies; section 2 also discusses the thin field-based literature on the consequences of limited diversity in organizations and groups. The final section of the paper, Section 3, reviews the evidence for policies and interventions aimed at weakening discrimination, covering role model and intergroup contact effects, as well as socio-cognitive and technological de-biasing strategies.
JEL: J0 J01 J1 J15 J16 J7 J71

How are you? How’s it going? What’s up? What’s happening? Nudging people to tell us how they really are

March 29, 2016
By: Carlsson, Fredrik (Department of Economics, School of Business, Economics and Law, Göteborg University) ; Kataria, Mitesh (Department of Economics, School of Business, Economics and Law, Göteborg University)
We investigate a novel approach to reduce measurement error in subjective well-being (SWB) data. Using a between-subject design, half of the subjects are asked to promise to answer the survey questions truthfully in an attempt to make them commit to truth-telling. This allows us to experimentally test whether making a promise affects their responses. We find a statistically significant difference between mean stated well-being between the two groups (with and without a promise, although the effect sizes are rather small). We then investigate to what extent the differences in stated well-being also affect the inference from regressions models on the determinants of SWB. We find important differences in terms of size and statistical significance of the coefficients between the two models, despite the small effect sizes on the dependent stated well-being variable.
Keywords: measurement error; social desirability; subjective well-being; truth-telling
JEL: C90 I30

Experimental Research on Labor Market Discrimination

March 29, 2016
By: David Neumark
Understanding whether labor market discrimination explains inferior labor market outcomes for many groups has drawn the attention of labor economists for decades – at least since the publication of Gary Becker’s The Economics of Discrimination in 1957. The decades of research on discrimination in labor markets began with a regression-based “decomposition” approach, asking whether raw wage or earnings differences between groups – which might constitute prima facie evidence of discrimination – were in fact attributable to other productivity-related factors. Subsequent research – responding in large part to limitations of the regression-based approach – moved on to other approaches, such as testing direct predictions of the Becker model using data on discriminatory tastes, or using firm-level data to estimate both marginal productivity and wage differentials. In recent years, however, there has been substantial growth in experimental research on labor market discrimination – even though the earliest experiments were done decades ago. Some experimental research on labor market discrimination takes place in the lab. But far more of it is done in the field, which makes this particular area of experimental research unique relative to the explosion of experimental economic research more generally. This paper surveys the full range of experimental literature on labor market discrimination, places it in the context of the broader research literature on labor market discrimination, discusses the experimental literature from many different perspectives (empirical, theoretical, policy, and legal), and reviews what this literature has taught us thus far, and what remains to be done.
JEL: J1 J7 K31

The Welfare Costs of Well-being Inequality

March 29, 2016
The Welfare Costs of Well-being Inequality
By: Leonard Goff ; John F. Helliwell ; Guy Mayraz
If welfare is measured using satisfaction with life (SWL), its variance is a natural measure of inequality that incorporates all the determinants of well-being with the same weights that determine welfare itself. In this paper we explore this possibility empirically in three different ways. First we show that inequality of subjective well-being has a negative effect on life satisfaction considerably greater than does income inequality. Second, we show that this comparative result is stronger for those who report themselves as valuing equality. Finally we show that social trust, which has been shown to support subjective well-being both directly and indirectly, is more fully explained by well-being inequality than by income inequality.
JEL: D6 D63 I31

Keeping up with the e-Joneses: Do online social networks raise social comparisons?

March 1, 2016
By: Sabatini, Fabio ; Sarracino, Francesco
Online social networks, such as Facebook, disclose an unprecedented volume of personal information amplifying the occasions for social comparisons, which are a source of frustration. We test the hypothesis that the use of social networking sites (SNS) increases social comparisons as proxied by people’s dissatisfaction with their income. After controlling for the possibility of reverse causality, our results suggest that SNS users have a higher probability to compare their achievements with those of others. We conclude that SNS can be a strong engine of frustration for their users.
Keywords: social networks; social networking sites; social comparisons; satisfaction with income; relative deprivation.
JEL: D83 I31 O33 Z1 Z13