Economic Network

American Economic Journal:

Economic Policy

Vol. 7, Issue 3 — August 2015

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() Human Capital and the Lifetime Costs of Impatience
Brian C. Cadena and Benjamin J. Keys
In this paper, we examine the role of impatience in human capital formation­arguably the most important investment decision individuals make during their lifetimes. We focus on a set of investment behaviors that cannot be explained solely by variation in exponential discounting. Using data from the NL SY and a straightforward measure of impatience, we find that impatient people more frequently invest in dynamically inconsistent ways, such as dropping out of college with one year or less remaining. The cumulative investment differences result in the impatient earning 13 percent less and expressing more regret as this cohort reaches middle age. (JEL D91, I26, J24, J31)
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() Housing Vouchers and the Price of Rental Housing
Michael D. Eriksen and Amanda Ross
We estimate the effect of increasing the supply of housing vouchers on rents using a panel of housing units in the American Housing Survey. We do not find that an increase in vouchers affected the overall price of rental housing but do estimate differences in effects based on an individual unit’s rent before the voucher expansion. Our results are consistent with voucher recipients renting more expensive units after receiving the subsidy. We also find that the largest price increases were for units near the maximum allowable voucher rent in cities with an inelastic housing supply. (JEL H23, I38, R31, R38)
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() Taxpayer Search for Information: Implications for Rational Attention
Jeffrey L. Hoopes, Daniel H. Reck and Joel Slemrod
We examine data on capital-gains-tax-related information search to determine when and how taxpayers acquire information. We find seasonal increases in information search around tax deadlines, suggesting that taxpayers seek information to comply with tax law. Positive correlations between stock market activity and search as well as year-end spikes in information search on capital losses when the market performs poorly suggest that taxpayers seek information for tax planning purposes. Policy changes and news events cause information search. These data suggest that taxpayers are not always fully informed, but that rational attention and exogenous shocks to tax salience drive taxpayer information search. (JEL D12, D83, H24, H31, K34)
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() Asymmetric Incentives in Subsidies: Evidence from a Large-Scale Electricity Rebate Program
Koichiro Ito
Many countries use substantial public funds to subsidize reductions in negative externalities. Such policy designs create asymmetric incentives because increases in externalities remain unpriced. I investigate the implications of such policies by using a regression discontinuity design in California’s electricity rebate program. Using household-level panel data, I find that the incentive produced precisely estimated zero treatment effects on energy conservation in coastal areas. In contrast, the rebate induced short-run and long-run consumption reductions in inland areas. Income, climate, and air conditioner saturation significantly drive the heterogeneity. Finally, I provide a cost-effectiveness analysis and investigate how to improve the policy design. (JEL D12, D62, H76, L94, L98, Q48)
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() US State Fiscal Policy and Natural Resources
Alexander James
An analytical framework predicts that, in response to an exogenous increase in resource-based government revenue, a benevolent government will partially substitute away from taxing income, increase spending and save. Fifty-one years of US-state level data are largely consistent with this theory. A baseline fixed effects model predicts that a $1.00 increase in resource revenue results in a $0.25 decrease in nonresource revenue, a $0.43 increase in spending and a $0.32 increase in savings. Instrumenting for resource revenue reveals that a positive revenue shock is largely saved and the rest is transferred back to residents in the form of lower non resource tax rates. (JEL H71, H72, H76, Q38, R11)
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() Did the Americanization Movement Succeed? An Evaluation of the Effect of English-Only and Compulsory Schooling Laws on Immigrants
Adriana Lleras-Muney and Allison Shertzer
We provide the first estimates of the effect of statutes requiring English as the language of instruction and compulsory schooling laws on the school enrollment, work, literacy, and English fluency of immigrant children during the Americanization period (1910-1930). English-only statutes moderately increased the literacy of certain foreign-born children, particularly those living in cities or whose parents were not fluent in English. However, these laws had no impact on immigrants‘ eventual labor market outcomes or measures of social integration (from 1940 census and WWII enlistment records). Only laws regulating the age when children could work significantly affected immigrant outcomes. (JEL I21, I26, I28, J13, J15, N31, N32)
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() Valuing the Wind: Renewable Energy Policies and Air Pollution Avoided
Kevin Novan
Exploiting variation in the hourly production from wind turbines, this paper quantifies the heterogeneity in the marginal impact of renewable electricity on pollution. The results reveal that output from competing renewable capacity additions­e.g., wind turbines versus solar panels­provide different marginal external benefits. This finding suggests that, if governments continue to subsidize renewables, an emphasis should be placed on designing policies that internalize the heterogeneous benefits. More generally, my results highlight that, by incorrectly assuming renewable electricity is a homogenous good, we will understate the relative efficiency of the first-best pollution prices. (JEL L94, L98, Q42, Q48, Q51, Q53, Q58)
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() How Is Tax Policy Conducted over the Business Cycle?
Carlos A. Vegh and Guillermo Vuletin
It is well known by now that government spending has typically been procyclical in developing economies but acyclical or countercyclical in industrial countries. Little, if any, is known, however, about the cyclical behavior of tax rates (as opposed to tax revenues, which are endogenous to the business cycle and, hence, cannot shed light on the cyclicality of tax policy). We build a novel dataset on tax rates for 62 countries for the period 1960-2013 that comprises corporate income, personal income, and value-added tax rates. We find that tax policy is acyclical in industrial countries but mostly pro cyclical in developing countries. (JEL E32, E64, H24, H25, O11, O23)
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