ECONOMICS - Brown University Roberto Serrano and Al Roth in Stockholm in December 2012, where Professors Roth and Shapley were awarded the Nobel Prize. 3 ECONOMICS AT BROWN UNIVERSITY

The academic year 2012-13 has been the first year with our colleague Christina Paxson as the President of Brown. As a result, many new initiatives are being put in place, in connection with a new fund-raising campaign. These initiatives cover a wide range, from the consolidation of Brown

as a world leader in graduate and undergraduate education, to the improvement of campus facilities, to the identification of focus initiatives in which Brown can showcase its special strengths.In the economics department, in terms of facilities, we welcome the recent new office space for our graduate students. It is located in the lower level of Corliss-Brackett, the building in back of Robinson Hall. We are also expecting to get new space assigned to the Experimental Social Sciences Lab in the next academic year. This lab will be incredibly useful to the group of experimental economics faculty and graduate students, and it will also be open to other social scientists that use similar methodology. We look forward to using these new facilities, which will contribute significantly to our department’s research and teaching mission.Both our graduate and undergraduate programs continue to be very healthy. Our graduating PhD’s have obtained great job placements at leading institusions, including a postdoc position at Columbia and a

Notes from the Chair

2013ECONOMICS

position of staff economist at the Board of Governors of the Federal Reserve. The combined number of graduates in all our undergraduate concentrations continue to place the department as the one with the highest number at Brown. We are proud of these accomplishments and we shall continue to strive to provide excellent graduate training and undergraduate education in economics.I could be talking next about the many wonderful researchers and teachers that we are blessed to have in the department, both at the undergraduate and graduate levels. But, instead, let me share with you my exciting experiences in a new course just offered last spring semester. I bring up this course here because it provides a useful connecting bridge between the different parts of the department, and also because it is a new idea that was conceived here at Brown. The course is a seminar, primarily intended for seniors concentrating in one of our majors, in which each weekly meeting consisted of a paper, presented “in an accessible manner” by one of our faculty or advanced graduate students, followed by a discussion between the class and the speaker. The reaction that the students taking the class had toward the course was extremely positive, some of them still incredulous about this completely new (to them) dimension of the department: “Wow, we thought you guys were so boring, just presenting the textbook materials in those great courses we have taken, and now we see you guys are working on such interesting problems…” The plan is to continue to offer this seminar course, which

BROWN UNIVERSITY

2ECONOMICS AT BROWN UNIVERSITY 2013

Notes from the Chair

Department of EconomicsDepartment Chair: Roberto SearranoDepartment Office: (401) 863 3836

Website: www.econ.brown.edu

Editor: Natalia IgnatyevaEmail Contact: [email protected]

will keep showcasing the world-class research done in the department to our undergraduates. In doing so, I get the feeling that the community of researchers in the department will be better understood by our students, and also, it is my secret hope that more of our graduates will be tempted by starting a career in economics research.As is customary in most top economics departments every year, the department’s activity in the faculty market has been high. For different family reasons, we lost three great colleagues (Kfir Eliaz, Blaise Melly, and Kaivan Munshi) and three other colleagues chose to retire (George Borts, Vernon Henderson, and Peter Howitt). We wish all of them the very best in their future. At the same time, we are delighted to welcome to the department three new faculty colleagues. Jonathan Eaton is joining us from Penn State and will be appointed as the William R. Rhodes Professor of International Economics, and will be the Director of the Rhodes Center for International Economics and Finance at Brown. Nathaniel Hilger is finishing his PhD at Harvard and Neil Mehrotra at Columbia, and both will join us as Assistant Professors of Economics. Let me here send my warmest public welcome to Jonathan, Nate, and Neil. In closing, I will say goodbye, since this will be the last year that I write this section for the newsletter. I have been proud to serve as department chair, but I will look forward to going back to my research and teaching full time. Louis Putterman has agreed to replace me as chair at the end of the 2013-14 school year. I am sure Louis will provide great leadership in all the important challenges that lie ahead, and he will continue to report to you on all the exciting activities associated with economics at Brown.

Roberto SerranoChair and Harrison S. Kravis University Professor of Economics

Roberto Serrano and Al Roth in Stockholm in December 2012, where Professors Roth and Shapley

were awarded the Nobel Prize


New Faculty

Neil MehrotraGraduating from Columbia University this spring, I am pleased to be joining the faculty in the Economics Department at Brown. My research areas are macroeconomics

and labor markets, and my current research is focused on understanding recent developments in the labor market. In particular, I am focused on the changing relationship between job openings and the unemployment referred to as the Beveridge curve. Since the end of the recession, job openings have risen to levels that historically imply a lower unemployment rate than what we currently see. My research finds evidence that disruptions in particular industries may be responsible for this breakdown. I am also working on a new project that examines the decline in turnover of jobs on the employer side. Businesses today are both creating and eliminated fewer jobs than before the recession, and I am examining how this may be linked to the decline in business formation and tighter conditions for obtaining credit. In addition to work on labor market issues, I also have work focusing on fiscal policy and analyzing differences in the relative multiplier between transfers and direct government spending. I look forward to working with faculty at Brown on these issues in the coming years.

Nate HilgerNate received his BA in Economics from Stanford University in 2004 and joins us this year after completing his PhD in Economics at Harvard. His dissertation focused on issues in the

economics of education. One of his papers shows that higher parental income during college-age years raises children’s college enrollment, but by much less than comparable changes in financial aid. Another paper shows that teachers who raise child test scores also tend to improve children’s future college outcomes and earnings. His ongoing research and teaching explore sources of inequality and policies that seek to help individuals overcome disadvantaged backgrounds.


New Faculty

Jonathan EatonI am delighted to be joining the economics department at Brown University where I look forward to interacting with students and colleagues.To introduce myself I provide an overview of current and past research, which has been largely in international economics. Over the years I have worked on a number of topics. Let me talk about three very dear to me.An early interest, in work with Mark Gersovitz, was sovereign debt. We began the research at a time when U.S. commercial banks were lending substantial amounts to various governments in Latin America. Some policy makers were voicing concerns about the safety of these loans, and worried that potential default posed a risk to the U.S. financial system. Thinking among international economists at the time was that governments didn't default, so that these concerns were misplaced. Given that there were no established procedures for dealing with countries in default (there still aren't) Mark and I asked what incentives a country has to repay its debts. Talking to bankers in the business, we got the answer that default would lead to a country's exclusion from international financial markets for some time. We built a model (which we took to what data there were then) to see how much of an incentive to repay this mechanism would provide, and how much lending it could sustain. About the time our first work was published, a wave of defaults swept through Latin America, giving us some visibility. Mark and I went on to work on other things, but, given the periodic episodes of default that have occurred since, the modern economic literature on sovereign debt is now large.In the past two decades a major component of my work, with Sam Kortum and other co-authors, has been on

the role of technological heterogeneity in international trade. We have exploited patent data to quantify the flow of ideas around the world and to isolate domestic and foreign sources of growth. In related work we have shown how the basic Ricardian model can be adapted to provide a useful tool for understanding bilateral trade patterns and specialization, answering such questions as the role of technology embodied in capital as a means of transmitting growth from innovating countries elsewhere. In recent work Sam, Brent Neiman, John Romalis, and I have introduced this framework into a dynamic multicountry, multisector model of economic fluctuations to assess the role of the trading system in propagating the Great Recession of 2008-2009 to different countries of the world.Traditionally, international economics has focussed on competitive markets in which individual participants are largely indistinguishable and play an imperceptible role. Recent access to microlevel data, such as that generated by customs records, reveals that participants are very diverse, with transactions dominated by a small number of very large players. These observations call for a reinvention of trade theory in which relationships between small numbers of buyers and sellers, rather than impersonal market forces, play a central role. Sam, Francis Kramarz and I have been developing such a framework using data from French customs and tax records as a guide. In related work Marcela Eslava, David Jinkins, C.J. Krizan, Jim Tybout and I have been using Colombian and U.S. data to learn about how Colombian firms seeking to export to the United States meet up with buyers and maintain relationships with them. This research not only provides an understanding of the data, but has the potential to help us understand how the world responds to various types of macroeconomic shocks. Viewing these responses in terms of networks of individual buyers and sellers rather than competitive market offers very different insights.


Obituary

Jerome Stein, Professor Emeritus of Economics/Visiting Professor of Applied Mathematics.Jerome Stein came to Brown in 1953. He became the Eastman Professor of Political

Economy in the Department of Economics in 1970. Upon his formal retirement in 1993, Jerry joined the Division of Applied Mathematics as a Visiting Professor. He passed away on February 7, 2013, aged 84.During his long and distinguished career, which he spent entirely at Brown, Jerry made many significant contributions across diverse fields including macroeconomic theory, monetary and fiscal policy, economic growth, applications of stochastic optimal control to international finance and debt crises, and policies for natural hazard mitigation. He served on the editorial boards of several prestigious economics journals, published over a dozen books, and authored over a hundred scholarly articles. His contributions were recognized by an honorary doctorate from the Universite de la Mediterranee, Aix-Marseille II that he received in 1997.After he formally retired in 1993, Jerry organized several economic theory conferences in the

economics department and continued his research in the Division of Applied Mathematics. Much of his research over the past years focused on very timely issues such as the global financial crisis and natural hazard assessments. In the last year of his life, Jerry completed a monograph entitled “Stochastic Optimal Control and the U.S. Financial Debt Crisis”, which was published by Springer. He also worked with Seth Stein, one of his sons, on a manuscript on “Playing Against Nature: integrating geoscience and economics in natural hazard mitigation” that explores: faced with the challenge of dealing, for instance, with future storm surges similar to that caused by Hurricane Sandy, how do we choose mitigation strategies given that their costs may be high and that the assessment of large hazards comes with large uncertainties?Jerry thoroughly enjoyed interacting with students and faculty: during his years both in the Department of Economics and the Division of Applied Mathematics, he regularly attended research seminars, workshops, weekly teas, and other events and used these occasions to chat with students and faculty about their and his work.Jerry will be remembered by his colleagues and students as a committed scholar, an inspiring mentor, and a trusted friend.


George Borts, Brown Economics Faculty 1950-2013When he was twenty-two years old, George Borts came to Brown as an Assistant Professor of Economics in 1950. He climbed through the ranks, being promoted to Associate Professor in 1954, and to Professor in 1960. A career of 63 years of service as a faculty member is virtually

unparalleled, not only at Brown, but anywhere else. As an economist, his main fields of interest have been transportation economics, industrial organization, and international finance. His distinguished academic trajectory includes a term as the Managing Editor of the American Economic Review, one of the most important academic journals of the profession, between 1969 and 1980.Over more than six decades at Brown, George Borts has had thousands of students, and supervised dozens of doctoral dissertations and senior theses. Until last year, he was teaching undergraduate courses on international finance and on the welfare state in America, as well as leading several independent studies on a variety of topics.George Borts is unanimously admired by his colleagues and students, who will always appreciate and remember his kindness, thoughtfulness, and sense of humor. A student in his most recent class praised his energy and dedication to teaching it. She commented: “I chose to concentrate in economics, largely after the great conversations that I had with him.” In 1992, when the current chair of the department arrived at Brown as an Assistant Professor, George Borts offered him his generous help: “by now I should know most things about Brown, so feel free to ask.” George Borts always had the highest academic standards. One of his PhD students from the 1960’s remarks: “he told me the paper was very good, but added that I couldn’t have a dissertation with only two factors of production, if I didn’t know what happened with three. Unfortunately, that generalization required me to learn a great deal of new econometrics and my

dissertation defence was delayed for several years because of that.” And as a token of George Borts’s sense of humor, here’s a story from a couple of years ago. A few economics professors went for lunch and the conversation turned to restaurants in New York. When someone at the table remembered that George Borts is from New York, he asked him: “George, being from New York, you must have an opinion. What are the good restaurants in New York?” George replied: “I don’t quite know. I left New York a long time ago, and all the people I knew there have dispersed, either horizontally or vertically.”The Department of Economics will be hosting a dinner in Professor Borts’s honor in September.

Emeritus

Vernon Henderson, Brown Economics Faculty 1974-2013J. Vernon Henderson is widely viewed as the leading urban economist of his generation. His research has been heavily influential in most areas of urban economics including systems of cities, urban growth and productivity, urbanization, local interactions, local public

goods provision, rural-urban migration and housing. His research also makes important contributions to the related fields of economic growth, development economics, environmental economics and public economics. His seminal work modeling systems of cities invigorated urban economics during the 1970s and is still very widely cited today. Since then, he has continued to be extraordinarily productive with research that has been influential not only to economists, but also to the broader community of social science researchers working on urban topics. He has written or edited seven books and numerous articles in top general interest economics journals. Vernon Henderson came to Brown in 1974 as Assistant Professor of Economics and Urban Studies after two and a half years at Queen’s University in Canada. He has remained at Brown ever since, being promoted to Associate Professor in 1979, Professor in 1982 and the prestigious Eastman Professor of Political Economy


Emerituschair in 1994. He has been a Research Associate at the National Bureau of Economic Research since 1982 and spent time as a visiting scholar at universities in India, Nepal and the United Kingdom. He has played a central role in building and strengthening the undergraduate Urban Studies Program at Brown University, serving as its chair in three separate stints for a total of 18 years. He also served as the chair of Economics for three years. He has been president of the Urban Economics Association since 2008 and has served on the editorial board for the Journal of Urban Economics, Regional Science and Urban Economics, the Journal of Economic Growth and is the Associate Editor of the Journal of Economic Geography.Vernon Henderson has played a central role in the promotion of undergraduate education in urban studies and urban economics at Brown. In addition to his central role in developing the urban studies curriculum as Chair of the program, he has taught undergraduate courses in urban economics and urbanization in China. He has also contributed markedly to the graduate program in Economics by teaching microeconomic theory and graduate urban economics, and by advising numerous doctoral students. He is regarded as a very congenial colleague who has contributed to the academic environment with humility and kindness. He will be missed.Brown University and the Department of Economics will commemorate Vernon Henderson’s retirement from Brown by sponsoring the 2014 edition of the annual Conference on Urban and Regional Economics (CURE) in his honor in September, 2014.

Peter W. Howitt, Brown Economics Faculty 2000-2013.Peter W. Howitt is one of the world’s most distinguished macroeconomists. He has made significant contributions to the theories of money, unemployment, the business cycle, and economic growth. Howitt’s early work was at the forefront of the search

for microfoundations of monetary theory. His more recent research in the field of economic growth and its connections with the knowledge-based economy and innovation has been widely influential in the development of endogenous growth theory. Even after retiring, he continues to be prolifically productive.

Peter Howitt came to Brown in 2000 as a Professor of Economics and was appointed Lyn Crost Professor of Social Sciences in 2001. He held previous faculty appointments at Ohio State University between 1996 and 2000, and the University of Western Ontario between 1972 and 1995, as well as visiting positions at many other prestigious institutions, including the Hebrew University of Jerusalem, Universite Laval, the Massachusetts Institute of Technology, Universite de Paris I, and the University of Toulouse. He is a Fellow of the Econometric Society, a Research Associate of the National Bureau of Economic Research, and an associate of the Canadian Institute of Advanced Research. He has served as President of the Canadian Economic Association. He has held important editorial positions, including being an Editor of the Journal of Money, Credit, and Banking, an associate editor of the American Economic Review, an Associate Editor of Econometrica, a member of the Board of Editors of the Journal of Economic Literature, an associate editor of the Journal of Economic Growth, and an associate editor of Macroeconomic Dynamics.Throughout his career, Peter Howitt has been a versatile teacher, a serious and thoughtful expositor of material, not a showman. At Brown he has taught both undergraduates and graduate students, all of whom have consistently recognized his effectiveness and his deep engagement with macroeconomics. His undergraduate teaching at Brown has included many sections of the intermediate macroeconomics course, a key requirement in all the concentrations that the economics department sponsors. In the Brown graduate economics program, he has contributed consistently to the first-year macroeconomics sequence and has supervised a high number of doctoral dissertations. He has always impressed his colleagues and students with the breadth and depth of his comments in one-to-one interactions and in seminars.When one asks about Peter Howitt to other economists, he is viewed as one of the leading researchers of his generation, a scholar with major and outstanding achievements, a fantastic colleague, an inspiring teacher and mentor, and a kind gentleman.The Department of Economics celebrated his retirement with a first-rate academic conference, which took place on May 9 and 10, 2013.


By Anna Aizer, Brown University and Joseph Doyle, MIT Sloan School of Management

The US incarcerates juveniles at a much higher rate than other nations and spends some $6 billion per year on juvenile corrections (Mendel (2011) whose Figure 1 is reproduced below). In fact, on any given day, there are over 70,000 juveniles in custody in the US (OJJDP, 2010) with an average (direct) cost of $88,000 per juvenile per year.

Despite such high rates and the associated direct costs, little is known about the impact of incarcerating juveniles on their long term outcomes such as educational attainment and recidivism as an adult. On the one hand, incarceration at an early age might serve to reduce future criminal activity by making the cost of later incarceration more salient. On the other hand, incarceration during adolescence may interrupt human and social capital accumulation at a critical moment leading to reduced future wages in the legal sector and greater criminal activity. We tested which of the two potential effects of juvenile incarceration dominates by examining empirically how incarceration as a juvenile

What is the Long Term Impact of Incarcerating Juveniles?

influences high school completion – a partial measure of social and human capital formation – and the likelihood of incarceration later in life.The lack of existing empirical work on this topic is due to two main factors. First, estimation is complicated by the fact that juveniles who are incarcerated differ from those who are not. They have likely committed more serious crimes, their background may be more disadvantaged, and as a result their underlying propensity to drop out of school and commit a crime in the future may be higher than that of juveniles who were not committed. Unfortunately, it is difficult to control for these confounding factors that tend

to overstate the effects of juvenile incarceration on the propensity to drop out of high school or become incarcerated as an adult. A second complicating factor is the dearth of data that includes information on juvenile incarceration and long-term outcomes. Survey data is generally insufficient to estimate the impact of juvenile incarceration on future outcomes because few survey respondents would have spent time in juvenile detention as a youth and there is underreporting of criminal activity and incarceration. To address the first complicating factor we exploit the random assignment of cases to judges who vary in their sentencing. More specifically, we examine


the outcomes of juveniles who are very similar on observable characteristics (same age, race, crime, neighborhood) but who by chance are assigned to judges who differ in their sentencing severity. In this way, we can compare the outcomes of two identical (or near identical) juveniles, one of whom, by virtue of random assignment to a “stricter” judge, is incarcerated and one of whom, by virtue of assignment to a more “lenient” judge, is not. With this strategy we address the issue of negative selection into juvenile incarceration. Second, we do not use survey data, but rather a unique source of linked administrative data for over 35,000 juveniles over 10 years who came before a juvenile court in Chicago, Illinois. These data were linked to both public school data for the same city and adult incarceration data for the same state to investigate effects of juvenile incarceration on high school completion and adult imprisonment.We find that juvenile incarceration reduces the probability of high school completion and increases the probability of incarceration later in life. While some of this relationship reflects omitted variables (as described above), even when we control for potential confounding factors using random assignment to judges, the relationships remain strong. In regressions with minimal controls, those incarcerated as a juvenile are 39 percentage points less likely to graduate from high school and are 41 percentage points more likely to have entered adult prison by age 25 compared with other public school students from the same neighborhood. Once we include demographic controls, limit our comparison group to juveniles charged with a crime in court but not incarcerated, and exploit random assignment to judges, juvenile incarceration is estimated to decrease high school graduation by 13 percentage points and increase adult incarceration by 22 percentage points. The results, while smaller than the initial results, remain large and suggest substantial negative effects of juvenile incarceration on long term outcomes.Our results suggest that incarcerating juveniles, at tremendous cost, serves to reduce their educational attainment and increase the probability of incarceration as an adult. Interestingly, after years of steady increases in juvenile incarceration, in the past decade, juvenile incarceration has started to decline. In particular, Chicago has more alternatives to incarceration now than it did when

many of the subjects were being sentenced in the early 1990s. Nationally, juvenile incarceration has dropped 32% from 2002 to the present (National Juvenile Justice Network, 2013). This is driven by both falling rates of crime and by concerted efforts on the part of roughly 10 (of the largest) states to reduce expenditures on juvenile incarceration by substituting to less costly community-based alternatives. The evidence presented here suggests that shifting to such alternatives will likely not only save the states money in the short run, but also reduce future crime and thus expenditures on corrections in the long run. Whether this trend of reductions in rates of juvenile incarceration will continue, however, is not clear. The New York City School Justice Partnership Task Force refers to the recent development of a “school to prison pipeline” whereby students involved in relatively minor infractions are increasingly likely to be arrested. Again the evidence presented here suggests that policies or practices putting more juveniles in detention are likely to have high short and long term costs. ReferencesHazel, Neal. 2008. Cross-National Comparison of Youth Justice. London: Youth Justice Board for England and Wales.Mendel, Richard A. 2011. No Place for Kids: The Case for Reducing Juvenile Incarceration. Baltimore: The Annie E. Casey Foundation.National Juvenile Justice Network and the Texas Public Policy Foundation. 2013. “The Comeback States: Reducing youth incarceration in the United States”. The New York City School Justice Partnership Task Force. 2013 “Keeping Kids in School and Out of Court”.Office of Juvenile Justice and Delinquency Prevention. 2011. Census of Juveniles in Residential Placement 2010 Washington, D.C.: OJJDP.


Patents and the Technological Frontier

By Alex Bell ’13My thesis documents how a group of inventors took advantage of a loophole in our patent system and shows how this response can be used to identify differences in the growth rate of technology across industries. This information can be linked to inter-industry wage data to test a leading theory explaining

the widening wage gap between skilled and unskilled laborers.The loophole allowed for “submarine patenting.” An inventor who files a submarine patent intentionally delays the issuance and publication of his patent with the hope that other inventors will independently discover the same innovation and turn it into a marketable product. At that point, the inventor causes his patent to issue and extorts a royalty from firms that are producing a product that infringes on his newly published patent, which was filed first.This strategy is dependent on the patent’s term of force beginning at issuance. In June of 1995, this loophole was closed when the term of force was changed to start counting down at filing, penalizing delays. I first establish that some inventors self-sorted to file ahead of the policy change, and offer compelling evidence that these inventors were pursuing this “submarine” strategy -- these patents do in fact take much longer to issue and are more likely to claim that other patents infringed on them.Comparing the likely submarine patents filed the week before the closure of the loophole with the ordinary patents filed the week after, it is evident that submarine patenting was much more prevalent in certain industries than others. What’s more, among those industries that did see a spike in filings before the loophole was closed, there exists a great deal of variability in how often submarine inventors were able to bring infringement suits.

I put forward the argument that submarine patents in fact provide a window into expectations of the technological frontier at the time they were filed. To illustrate, if a submarine inventor finds himself unable to target a firm infringing on his idea after many years, then his invention is no longer relevant because the technological paradigm has shifted in his field. I observe that the industries with the largest share of submarine patents failing to bring infringement suits are in fact industries that have undergone massive shifts in technological paradigms, such as fax machines with the advent of email and photography with the replacement of film with digital cameras. Given this discontinuity-based method for identifying submarine patents, one could infer which industries have undergone paradigm shifts, evidenced by a failure of submarine patents to assert infringement.One application of this finding may be to studying the so-called “earnings-education gap.” For decades, economists have been interested in understanding the widening of the wage gap between skilled and unskilled workers. A leading hypothesis has been that this phenomenon has something to do with “skill-biased technical change” – a notion that rapid technological progress increases returns to skill, perhaps because more skilled or educated workers are better able to adapt to the new technology. While fairly precise data is maintained on wages for skilled and unskilled workers in various industries, economists have struggled to find a measure of technical change at the industry level. I argue that failed submarine patenting gives researchers a way to observe technological change at the industry level, and I hope this method of identification will prove useful for understanding the growth of the earnings-education gap.


Caption: Number of patent filings and eventual assertions of infringement shown for patents filed in 1995 by day of filing (June 7 marked). Of industries that experienced large spikes in patent filings prior to the policy change, large discrepancies exist in how useful the submarine patents eventually were for producing infringement suits. It appears that submarine patents in the two lower industries were rendered useless by a shift in the technological paradigm.


By Anthony Bakshi ‘13

In any workplace, it is beneficial for employees to respond positively to increased incentives. Traditional economic theory supports a positive correlation between incentives and performance, whereby higher incentives lead to greater effort and improved outcomes. But recent empirical research (Ariely et al., 20091; Chib et al., 20122) has yielded results that call this relationship into question. High incentives can sometimes result in performance decreases caused by factors like detrimental levels of self-focus. Professional sports, with their high-stakes work environments and measurable outcome levels, provide an ideal arena for such research. My thesis, advised by Professor Pedro Dal Bo, focused on a particular group of players in Major League Baseball (MLB), the premier professional baseball league. Closers are a subgroup of baseball pitchers that are primarily used in Save Situations (SS), typically the final inning of close games in which their team is leading. Because of closers’ supposed ability to perform well in such high-pressure, “clutch” situations, they enjoy a level of positional prestige and wages significantly higher than those of comparable relief pitchers. My study considered the anecdotal conviction regarding the motivational benefits of the SS game state — held by a great deal of fans, media members and, most curiously, the closers themselves — and aimed to empirically test the validity of such an effect. A specification was developed that moves beyond

Performance Variation among Major League Baseball Closers: Field Evidence of Situational Pressure Effects

naïve comparisons between SS and typically lower-pressure situations called Non-Save Situations (NSS). It incorporates controls for key variables like the skill levels of the closers and opposing batters, as well as other situational factors that can potentially influence closer performance. These include game run difference, closer contract status, game location and Leverage Index (LI), a precise measure of situational importance for every pitcher-batter interaction. After analyzing more than 26,000 plate appearances, the study’s results support a beneficial impact of the SS game state on closer performance. Closers are 12 percent less likely to yield a hit or a walk in an SS than in an NSS, all else equal. The data also supports a significant effect of changes in the LI on plate appearance outcome. Though closers are about four percent more likely to allow a baserunner for every unit increase of LI (a sign of significantly more influential game situations) in an NSS, an identical increase while concurrently in an SS state significantly improves the likelihood of pitcher success by about one percent. The results lend credence to the beneficial impact of heightened intensity within SS game states that has been verbally acknowledged by closers. After testing for the average effects of changes in game situation, the study delves into the heterogeneity of these effects among the 96 closers in the sample. A “Clutchness” ranking is developed by isolating the effects of the situational pressures studied on individual pitchers. The ranking system incorporates baseline performance levels to present a comprehensive view of closer performance in high-pressure games. The study contributes to the literature regarding the effects of psychological pressure and motivation on agents in high-stakes environments, as well as to recent work examining the influence of situational

1Ariely, Dan, Uri Gneezy, George Loewenstein, and Nina Mazar. 2009. “Large Stakes and Big Mistakes.” Review of Economic Studies, Vol.76, No. 2, pp. 451-469.

2Chib, V. S., B. De Martino, S. Shimojo, and J. P. O'Doherty, 2012, Neural mechanisms underlying paradoxical performance for monetary

incentives are driven by loss aversion, Neuron 74, 582-594.


pressure on professional sporting event outcomes. Such research has shown negative effects of psychological pressure on penalty kicks in soccer matches (Apesteguia and Palacios-Huerta, 2010 ) and varying effects in professional basketball (Goldman and Rao, 2012 ). The conclusions of this study suggest that the relationship between situational factors and closer performance is valid and an area apt for further investigation.

By Christine Lai ‘13Since the controversial vote certification of the 2000 election, policymakers have moved to adopt new voting regulations to ensure the integrity of the election system. Among these regulations are the voter identification laws that had dominated public debate leading up to and throughout the 2012 presidential election. Under these laws, all voters would be required to present identification at the polls; though, the specific requirements of each voter ID law varies by state. Support for voter ID laws primarily comes from

The Impact of Voter Identification Laws on Voter Participation

Republicans who claim that these laws prevent rampant voter fraud. On the other hand, Democrats argue that voter ID laws disproportionately disenfranchise Democratic voters. In the 2010 elections, 25 states had some form of voter identification laws enacted. Since then, there have been 45 attempts by states to adopt or strengthen voter ID laws -- only seven of which were eventually enacted. However, there has been little empirical evidence demonstrating the impact of these laws on voter participation. In my thesis, I first ask what are the economic and political determinants of a state enacting a voter ID law? Given the partisan nature of the debate and the variability of successful enactment, I investigate the


factors that make it more likely for a state to adopt voter ID laws. Using state voting patterns in federal elections as a proxy for political ideology, I find that states that cast a greater share of votes for Democratic candidates are less likely to pass voter ID legislation. For illustration, consider two states: a conservative state that votes 40% Democratic and a liberal state that votes 60% Democratic. I estimate that the liberal state is 22% less likely to adopt a voter ID law. In addition, I find that Republican governors are associated with a considerable increase in the likelihood of legislative success and Democratic governors are exercising their influence through vetoes.

Second, using data from the Census and Current Population Survey Voting and Registration Supplement up to the 2010 election, I investigate the impact of these laws on voter turnout at both the state and individual level. While my results suggest that voter ID laws do not affect voter turnout at the aggregate level, I do find that non-photo ID laws decrease turnout for Hispanic voters relative to non-Hispanics. In addition, the presence of a strict photo ID law decreases the

likelihood of registration by 7.3% for a Hispanic voter. The implication of these findings is that while voter ID laws may not affect the majority of current voters, they do seem to be discouraging certain segments of the population from voting and registering. The figure below shows the increase in voting disparity between Hispanic and non-Hispanic voters when a voter ID law is adopted. My results bear significance in the recent Supreme Court case Shelby County vs. Holder. In June 2013, the Supreme Court struck down parts of the Voting Rights Act of 1965 that gave the Department

Caption: For the 25 states with voter ID laws, the average turnout for Hispanic voters decreases after enactment, while turnout does not change (or increases) for non-Hispanic voters. The result is a widening disparity between average turnout for Hispanic and non-Hispanic voters.

Event Study of Turnout for Hispanic and Non-Hispanic Voters Relative to Year of Enactment

of Justice the ability to block certain states with a history of disenfranchisement from changing their voting regulations. These procedures of Section V had prevented some states from implementing their recent voter ID laws, and this ruling now opens doors for states to more easily adopt voter ID laws. However, my findings suggest that these voter ID laws are implemented on a political basis and may worsen disparities in ballot access.


By Zhi Wang, PhD*Previous studies have documented an unprecedented trend of declining internal migration rates in the U.S. since the 1980s, and they suggest that this steady decline in mobility is not related to changes in demographics (e.g., age, education and marital status), income, employment, household labor force participation, occupation, industry, or homeownership. Over the same time period, the wage growth premium in larger locations has also been expanding. This paper contributes a new explanation of the steady decline in mobility in the U.S. to the existing literature. Young workers start their first jobs in big cities where they experience more rapid wage growth. After their first few years in the labor force, workers leave big cities for less populated areas, and the wage growth gain is portable for workers switching locations. The increase in wage growth premium in larger locations has induced people in 1990 and 2000 to stay in these more populated locations longer than their 1980 counterparts, causing the drop in internal migration rates. Using the Census Public Use Microdata 5 percent samples from 1980, 1990 and 2000, I show that, for the sample of white male workers with a bachelor’s degree, the migration rates over three consecutive decades affirm this steady drop in internal migration. However, in contrast to the findings in previous studies,

Smart City, Life-Cycle Migration and Falling Mobility since the 1980s

the falling migration mainly comes from the decline in migration from relatively large to relatively small locations. In addition, the migration rates of young workers at labor force entry (aged 22-26), in fact, has been slightly increasing between 1980 and 2000 due to the rise in migration from smaller to larger locations. The subgroups experiencing the decline in mobility are people aged above 27 who entered the labor force in large metropolitan areas.I measure the wage growth differentials of American Metropolitan Statistical Areas (MSAs) over time using two adjacent age cohorts (22-26 and 27-31) from the corresponding census. This method allows me to generate wage growth differentials for a large sample of MSAs in the contiguous United States. Estimates show that the wage growth differentials have been expanding in MSAs with large population sizes since 1979. By pooling the individual-level data from the 1980, 1990 and 2000 censuses, I show that the increase in wage growth gain in relatively large MSAs has induced people in 1990 and 2000 to stay in these more populated locations longer than their 1980 counterparts. The estimates show that, for people aged 27-35 in my sample, the changes in wage growth differentials across American MSAs between 1980 and 2000 can alone account for a large fraction of falling migration for people aged 27-35. By introducing a typical lifecycle migration pattern and examining the impact of the change in city attributes on people’s relocation decisions after labor force entry, my paper improves understanding of the reasons for the trends in internal migration in the U.S. over the past three decades.

*Zhi Wang completed her PhD in Economics this May under advisers Vernon Henderson, Nathaniel Baum-Snow and Andrew Foster. She joined the Fudan University School of Economics as an Assistant Professor.

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Commencement 2013

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ECONOMICS - Brown University Roberto Serrano and Al Roth in Stockholm in December 2012, where Professors Roth and Shapley were awarded the Nobel Prize. 3 ECONOMICS AT BROWN UNIVERSITY