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    We nonparametrically estimate spillovers of properties financed by the Low Income Housing Tax Credit (LIHTC) onto neighborhood residents by developing a new difference-in-differences style estimator. LIHTC development revitalizes low-income neighborhoods, increasing house prices 6.5%, lowering crime rates, and attracting racially and income diverse populations. LIHTC development in higher income areas causes house price declines of 2.5% and attracts lower income households. Linking these price effects to a hedonic model of preferences, LIHTC developments in low-income areas cause aggregate welfare benefits of $116 million. Affordable housing development acts like a place-based policy and can revitalize low-income communities.

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    We analyze the costs and benefits of using social image to foster virtuous behavior. A Principal seeks to motivate reputation-conscious agents to supply a public good. Each agent chooses how much to contribute based on his own mix of public-spiritedness, private signal about the value of the public good, and reputational concern for appearing prosocial. By making individual behavior more visible to the community the Principal can amplify reputational payoffs, thereby reducing free-riding at low cost. Because societal preferences constantly evolve, however, she knows only imperfectly both the social value of the public good (which matters for choosing her own investment, matching rate or legal policy) and the importance attached by agents to social esteem and sanctions. Increasing publicity makes it harder for the Principal to learn from what agents do (the "descriptive norm") what they really value (the "prescriptive norm"), thus presenting her with a tradeoff between incentives and information aggregation. We derive the optimal degree of privacy/publicity and matching rate, then analyze how they depend on the economy's stochastic and informational structure. We show in particular that in a fast-changing society (greater variability in the fundamental or the image-motivated component of average preferences), privacy should generally be greater than in a more static one.

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    A model of hiring into posted job slots suggests hiring is based on comparative advantage: being hired depends not only on one's own skill but also on the skills of other applicants. The model has numerous implications. First, bumping of applicants occurs when one job-seeker is slotted into a lower paying job by another applicant who is more skilled. Second, less able workers are more likely to be unemployed because they are bumped. Third, vacancies are higher for harder to fill skilled jobs. Fourth, some workers are over-qualified for their jobs whereas others are under-qualified. These implications are borne out using four different data sets.

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    We study bank supervision by combining a theoretical model distinguishing supervision from regulation and a novel dataset on work hours of Federal Reserve supervisors. We highlight the trade-offs between the benefits and costs of supervision and use the model to interpret the relation between supervisory efforts and bank characteristics observed in the data. More supervisory resources are spent on larger, more complex, and riskier banks. However, hours increase less than proportionally with bank size, suggesting the presence of technological scale economies in supervision. The data also show reallocation of supervisory hours at times of stress and in the post-2008 enhanced supervisory framework for large banks, providing evidence of constraints on supervisory resources. Finally, we show theoretically limits to assessing supervisory success based on ex-post outcomes, as well as benefits of ex-ante commitment policies.

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    The increase in the prevalence of obesity worldwide has led to great interest in the economic consequences of obesity, but valid and powerful instruments for obesity, which are needed to estimate its causal effects, are rare. This paper contributes to the literature by using a novel instrument: genetic risk score, which reflects the predisposition to higher body mass index across many genetic loci. We estimate IV models of the effect of BMI on labor market outcomes using Finnish data that have many strengths: genetic information, measured body mass index, and administrative earnings records that are free of the problems associated with non-response, self-reporting error or top-coding. The first stage of the IV models indicate that genetic risk score is a powerful instrument, and the available evidence from the genetics literature is consistent with instrument validity. The results of the IV models indicate weight reduces earnings and employment and increases social income transfers, although we caution that the results are based on small samples, and are sensitive to specification and subsample.

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    Analysts who have concluded that inequality in life expectancy is increasing have generally focused on life expectancy at age 40 to 50. However, we show that among infants, children, and young adults, mortality has been falling more quickly in poorer areas with the result that inequality in mortality has fallen substantially over time. This is an important result given the growing literature showing that good health in childhood predicts better health in adulthood and suggests that today's children are likely to face considerably less inequality in mortality as they age than current adults. We also show that there have been stunning declines in mortality rates for African-Americans between 1990 and 2010, especially for black men. The fact that inequality in mortality has been moving in opposite directions for the young and the old, as well as for some segments of the African-American and non-African-American populations argues against a single driver of trends in mortality inequality, such as rising income inequality. Rather, there are likely to be multiple specific causes affecting different segments of the population.

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    This article shows that global financial markets cannot, by themselves, achieve net transfers of financial capital and real interest rate equalisation across countries and that the integration of both global financial markets and global goods markets is needed to achieve net transfers of capital and real interest rate equalisation across countries. Thus, frictions (barriers to mobility) in one or both of these markets can impede the net transfer of capital between countries, produce the Feldstein and Horioka (1980) finding of high saving-investment correlations, and prevent real interest rates from being equalised across countries. Moreover, frictions in global goods markets can explain why real exchange rates deviate from PPP (purchasing power parity) for extended periods of time and can therefore also explain the PPP puzzle. Thus, we are able to resolve 2 of Obstfeld and Rogoff's (2000) "6 major puzzles in macroeconomics" with essentially the same explanation.

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    It is difficult to resolve the global warming free-rider externality problem by negotiating many different quantity targets. By contrast, negotiating a single internationally-binding minimum carbon price (the proceeds from which are domestically retained) counters self-interest by incentivizing countries to internalize the externality. In this contribution I attempt to sketch out, mostly with verbal arguments, the sense in which each country's extra cost from a higher emissions price is counter-balanced by that country's extra benefit from inducing all other countries to simultaneously lower their emissions in response to the higher price. Some implications are discussed. While the paper could be centered on a more formal model, here the tone of the discussion resembles more that of an exploratory think piece directed to policymakers and the general public.

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    Over the past few decades, worldwide real interest rates have trended downward. The real interest rate describes the terms of trade between risk-tolerant and risk-averse investors. Debt pays off equally across contingencies at a given future date, so debt is valuable to risk-averse investors to smooth consumption across those contingencies. In an equilibrium with trade between investors who differ in attitudes toward risk, the risk-tolerant investors will borrow from the risk-averse ones, shifting the risk to those whose preferences favor taking on risk. In the case where investors have preferences that are additively separable in future states and in time, attitudes toward risk are heterogeneous among investors if they differ in the curvature of their utility kernels and differ in their beliefs about the probabilities of outcomes, especially adverse outcomes. If the composition of investors shifts toward those with higher curvature (higher coefficients of relative risk aversion) and toward investors who believe in higher probabilities of bad events, the real interest rate falls. The paper calculates likely magnitudes of the decline and presents evidence in favor of a shift in the composition of investors toward the more risk-averse. The downward trend in real interest rates is a significant problem for monetary policy but is helpful to heavily indebted countries.

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    Does an intensification of competition among banks increase or decrease liquidity creation? By integrating the dynamic process of interstate bank deregulation that lowered barriers to competition across U.S. states over the 1980s and 1990s with the gravity model of the geographic expansion of banks, we construct time-varying measures of the competitive pressures facing each individual bank. We find that regulatory-induced competition reduced liquidity creation. Consistent with some theories, we also find that the liquidity-destroying effects of competition are mitigated among more profitable banks and heightened among smaller banks.

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    The use of "pay-for-delay" settlements in patent litigation - in which a branded manufacturer and generic entrant settle a Paragraph IV patent challenge and agree to forestall entry - has come under considerable scrutiny in recent years. Critics argue that these settlements are collusive and lower consumer welfare by maintaining monopoly prices after patents should have expired, while proponents argue they reinforce incentives for innovation. We estimate the impact of settlements to Paragraph IV challenges on generic entry and evaluate the implications for drug prices and quantity. To address the potential endogeneity of Paragraph IV challenges and settlements we estimate the model using instrumental variables. Our instruments include standard measures of patent strength and a measure of settlement legality based on a split between several Circuit Courts of Appeal. We find that Paragraph IV challenges increase generic entry, lower drug prices and increase quantity, while settlements effectively reverse the effect. These effects persist over time, inflating price and depressing quantity for up to 5 years after the challenge. We also find that eliminating settlements would result in a relatively small reduction in research and development (R&D) expenditures.

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    How much do different monetary and non-monetary motivators induce costly effort? Does the effectiveness line up with the expectations of researchers? We present the results of a large-scale real-effort experiment with 18 treatment arms. We compare the effect of three motivators: (i) standard incentives; (ii) behavioral factors like present-bias, reference dependence, and social preferences; and (iii) non-monetary inducements from psychology. In addition, we elicit forecasts by behavioral experts regarding the effectiveness of the treatments, allowing us to compare results to expectations. We find that (i) monetary incentives work largely as expected, including a very low piece rate treatment which does not crowd out incentives; (ii) the evidence is partly consistent with standard behavioral models, including warm glow, though we do not find evidence of probability weighting; (iii) the psychological motivators are effective, but less so than incentives. We then compare the results to forecasts by 208 experts. On average, the experts anticipate several key features, like the effectiveness of psychological motivators. A sizeable share of experts, however, expects crowd-out, probability weighting, and pure altruism, counterfactually. This heterogeneity does not reflect field of training, as behavioral economists, standard economists, and psychologists make similar forecasts. Using a simple model, we back out key parameters for social preferences, time preferences, and reference dependence, comparing expert beliefs and experimental results.

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    The quantity theory of money is applied to the paper money regimes of seven of the nine British North American colonies south of New England. Individual colonies, and regional groupings of contiguous colonies treated as one monetary unit, are tested. Little to no statistical relationship, and little to no magnitude of influence, between the quantities of paper money in circulation and prices are found. The failure of the quantity theory of money to explain the value and performance of colonial paper money is a general and widespread result, and not an isolated and anomalous phenomenon.

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    Motivated by the unique experience of Israel of a supply-side shock of skilled migration, and the concurrent rise in disposable income inequality, this paper develops a model which can explain the mechanism through which a supply-side shock of skilled migration can reshape the political-economy balance and the redistributive policies. First, it depresses the incentives for unskilled migrants to flow in, though they are still free to do so. Second, tax-transfer system becomes less progressive. Nonetheless, the unskilled native-born may well become better-off, even though they lose their political clout.

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    Year-to-date (YTD) trading volumes on the Dubai Gold & Commodities Exchange (DGCX) crossed 6 million contracts in April 2016, growing 45% over the same period last year whilst maintaining a steady Average Daily Open Interest of 109,487 contracts. read more...

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    Nasdaq (Nasdaq:NDAQ) today publishes monthly trade statistics for the Nordic1 and Baltic2 markets. Below follows a summary of the statistics for April 2016:read more...

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    The monthly volume on EEX’s power derivatives market amounted to 416.3 terawatt hours (TWh) in April 2016 which is an increase of nearly 150% compared to April 2015 (167.1 TWh). Furthermore, this represents a new monthly record that significantly exceeds the previous record of 332.4 TWh traded in January 2016.read more...

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    Governor Jack Markell today announced a groundbreaking initiative by the State of Delaware to embrace the emerging blockchain and smart contract technology industry, which can help the public and enterprises lower their transactional costs, speed up and automate manual processes, and reduce fraud.read more...

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      David S. Rose's book THE STARTUP CHECKLIST: 25 Steps to Scalable, High-Growth Business applies the dual perspective of an angel investor and serial entrepreneur to give entrepreneurs the truth about the crucial dos and don’ts they need to take to get a business started and to attract capital. Read More...

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    The Sloan Management Review published a piece recently about the connection between employee engagement and profitability growth. V. Kumar and Anita Pansari conducted research on employee engagement in a wide range of companies.  They first set out to define engagement, given that many people look at the concept differently.   They settled on a definition that encompassed five dimensions of engagement: We wanted to use our discussions with managers and a review of the literature to understand how employee attitudes and behaviors affected company performance. This led us to define employee engagement as “a multidimensional construct that comprises all of the different facets of the attitudes and behaviors of employees towards the organization.”7 The five dimensions of employee engagement are: employee satisfaction, employee identification, employee commitment, employee loyalty and employee performance.The scholars used their "employee engagement scorecard" to measure engagement in 75 companies in 7 different countries.  One year later, they examined profitability growth at 30 of those firms in depth.  Here's their conclusion:After controlling for other relevant factors including GDP level, marketing costs, the nature of the business and the type of goods, we found that the highest level of growth in profits (10% to 15%) occurred in the group of companies whose employees were highly engaged; the lowest level of growth in profits (0% to 1%) occurred in the group of companies whose employees were disengaged.

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