Dean Baker: If a Vaccine Resistant Strain Develops in Africa, Will Dr. Fauci Lose His Job?

If a Vaccine Resistant Strain Develops in Africa, Will Dr. Fauci Lose His Job?

This is a very serious question, even if I'm using a bit of clickbait here. I'm not out to get Dr. Fauci, who deserves some sort of Nobel Prize for trying to give straight information to the public, even as Donald Trump was doing everything he could to minimize the pandemic. But there is an important issue of both, our current failings in vaccinating the world, and a system that almost always allows those at the top to escape responsibility for their failures.

I have gone on at lengthbefore about the need to vaccinate the world. The spread of the Delta variant should make the point obvious to everyone. The more the virus spreads, the more it has opportunities to mutate.

We are actually fortunate with the Delta variant since it seems our vaccines are still effective in reducing the risk of infection and very effective in reducing the risk of severe illness or death. But this is just luck. If the pandemic spreads enough, we will see more mutations. It is entirely possible that a new strain will develop against which our vaccines provide us little or no protection.

It may be the case, as Pfizer and Moderna claim, that it will be possible to quickly design an effective mRNA vaccine against a new strain. But even in a best case scenario, where it takes just a few weeks to develop a new vaccine, it will still be many months before it can be tested, produced, and distributed to hundreds of millions of people across the country and billions across the world.

In the meantime, we will be seeing a whole new round of infections and deaths, as well as trillions of dollars of lost economic output. And, just to be clear, these trillions in lost output is not just an issue of stacks of dollar bills in a vault, this translates into people going without food, medical care, shelter and other basic needs. Rich countries have the resources to largely protect their populations from most of the economic impact of the pandemic, developing countries in Asia, Africa, and Latin America do not.

Of course, even for the rich countries it will mean trillions more in government debt. That means a lot of to some people when a Democrat is in the White House.

The Open-Source Alternative

The drug companies will tell us that they are actually doing the best they can in getting the world vaccinated. They have in fact ramped up production considerably, although the bulk of their vaccines is still going to wealthy countries.

But the real question is whether we could be producing more vaccines, taking advantage of capacity not only in rich countries but in countries like India, Brazil, South Africa, Pakistan and other developing countries with potential manufacturing capacity. Our friends in the pharmaceutical industry tell us that manufacturing these vaccines is a complex process and can't just be done overnight.

Of course, everyone in the world understands that it can't be done overnight, which is why many of us were advocating rampingup capacity a year and a half ago. The pharmaceutical industry has been engaged in a filibuster, at least since October, when South Africa and India introduced their WTO resolution for suspending intellectual property rules for the duration of the pandemic, telling us it takes time to increase production. And, if we had focused on increasing production at the time they began their filibuster, we could have produced many more vaccines by now.

The logic of open-sourcing vaccines is that we would put the details of the manufacturing process for the vaccines on the web, allowing engineers around the world to study them as the basis for new facilities or converting existing ones. Ideally, the engineers for the Pfizer, Moderna, AstraZeneca and the rest (including the Chinese, Russian, and Indian vaccines) would also be available to conduct webinars and to provide in-person guidance.

Last month I was on a panel with someone from the pharmaceutical industry who questioned how this sort of transfer could be legally required. I pointed out that we (the U.S. and other rich country governments) should offer to pay a reasonable price for this expertise. If the drug companies refused, then we should go directly to their top engineers and offer them exorbitant pay (e.g. $1-2 million a month) for sharing their knowledge. Since they are undoubtedly bound by non-disclosure agreements, so governments would also have to commit to cover their legal expenses and any payments resulting from lawsuits. (The drug industry lawsuits, for sharing life-saving information in a pandemic, should at least help to clear up any ambiguity about their reason for existence.)

If vaccinating the world was treated as a real emergency, does anyone doubt something like this would happen? If GE or Lockheed had developed a new sonar in World War II that made it easier to detect German submarines, does anyone think we would just sit there and say that this is proprietary knowledge, and nothing can be done, if the companies chose not to share it with the government?

In addition to sharing existing knowledge, open-sourcing the production process should also allow for innovations that would increase production. The official position of the industry is that they have mastered the process for manufacturing their vaccines and it cannot possibly be improved. This claim is absurd on its face.

In February, Pfizer announcedthat it had discovered a way to cut its production time in half. Pfizer also discovered that its vaccine did not have to be super-frozen at temperatures of less than minus 90 degrees Fahrenheit, but instead could be stored in a normal freezer for up to two weeks. This makes a huge difference in transporting its vaccine, especially in developing countries. Pfizer also discovered that its standard vial contained enough material for six doses, rather than just five. As a result of this mistake, one sixth of the Pfizer vaccines were being thrown down the toilet for the first couple of months after it was approved.

Given this history, it's hard to believe that there is no way to further improve on the production processes of Pfizer or the other vaccine manufacturers. If engineers all around the world had the opportunity to inspect their methods, surely many would be able to come up with innovations that could speed up the production and distribution of vaccines.

Does Making Deadly Mistakes Carry Consequences?

As much as the industry and politicians might want to pretend there was/is no way to accelerate the production of vaccines, that story is not credible. We had an alternative path that would have required the sharing of knowledge and expertise, and over-riding patent rights. We did not go this path. Thus far, we have been very fortunate. No vaccine resistant strain has yet developed and spread widely.

Hopefully, the world's good luck in this respect will continue, as we vaccinate the developing world, however slowly. It is worth noting that even with the spread of the Delta variant, the number of new cases in former hotspots like India and Brazil, has fallen sharply in recent weeks. This is presumably the result of many people enjoying some immunity from previous infections, as well as increasing levels of vaccinations.

But we certainly can't take for granted that a vaccine resistant strain will not develop. And, if that happens, and we face the horror story of having to go through a whole new round of infections and shutdowns, the question is whether anyone will be held accountable?

My guess is that the answer will be no. (Who ended up unemployed because of the war in Iraq or the housing bubble?) The major media outlets will likely pretend that there was nothing that could have been done. They may acknowledge that we could have been somewhat quicker in getting out our vaccines to developing countries, but they will not acknowledge even the possibility that open-sourced technology could have sped up the production process for vaccines in both rich and developing countries. The idea that millions of people will needlessly die because our political leaders did not want to jeopardize the profits of the pharmaceutical industry is too horrible to be aired in places like the New York Times, Washington Post, and National Public Radio.

The long and short is that, in our high-tech globalized economy, accountability is only something that those at the bottom have to worry about. Dishwashers and truck drivers get fired when they mess up on the job. Top public health officials, and indeed the whole public health profession, are largely immune from this sort of accountability for infinitely bigger mess-ups.

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John Case
Harpers Ferry, WV

Enlighten Radio

Socialist Economics

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Biden, Congress, and states pass the buck on halting evictions [feedly]

Biden, Congress, and states pass the buck on halting evictions
https://www.peoplesworld.org/article/biden-congress-and-states-pass-the-buck-on-halting-evictions/

WASHINGTON—In a giant exercise of pass the buck, Congress, President Biden and the states are dithering while evictions of renters nationwide started even before a federal moratorium ended at midnight on July 31.

Biden says the issue is up to Congress. His hands are tied, he claims, by a Supreme Court ruling last month against a moratorium, unless solons act.

Congress is urging Biden to step in. House Democratic leaders tried to put together a quick rental moratorium extension, through Oct. 18, together. They failed.

House Financial Services Committee Chair Rep. Maxine Waters, D-Calif., blasted Biden's "unexpected lack of effort and refusal to use his authority" to extend the moratorium.

Waters, whose district includes inner-city Los Angeles, pushed for a vote on her bill, HR4791, to extend it through the end of the year. But the Democratic leaders ducked by deciding to bring it up only if every lawmaker agreed to consider it. Republicans, led by Cathy McMorris Rodgers, R-Wash., objected.

The National Low-Income Housing Coalition pointed out in a letter to lawmakers that Biden agencies, notably the Housing and Urban Development and Treasury Departments, could step in now, under existing law, to get aid to at least the federally funded tenants among the estimated six million families who would be left homeless. They haven't.

Bureaucratic requirements blamed for delays

State tenant rights groups and tweeters say slow bureaucratic procedures–including requirements people go online to seek aid when the tenants don't have computers or WIFI—-or outright refusal to send out the money risks putting people out on the street.

And waiting in fear are an estimated six and half million families who fell behind on their rent because people lost their jobs due to the raging coronavirus pandemic.

Evictions have already started, as Waters's House Financial Services Committee, which also handles housing legislation, learned July 30. The panel found some big chain landlords didn't even wait for the current moratorium to end before telling tenants to get out.

Pass the buck, please.

"The administration is going to work together with leaders in Congress on potential avenues to extend the eviction moratorium to protect these vulnerable renters and their families," Biden's Deputy Press Secretary Karine Jean-Pierre told reporters on July 30. "We understand how critical that is, how important that is.  It has been a lifeline to so many.

"We're encouraging the states to get (aid) that out as soon as possible.  They have it.  They need to get that out."

"Action is needed, and it must come from the administration," House Speaker Nancy Pelosi, D-Calif., Majority Leader Steny Hoyer, D-Md., Majority Whip James Clyburn, D-S.C., and Assistant Speaker Katherine Clark, D-Mass., said in a joint statement.

"Science and reason demand that they must also extend the moratorium in light of the (coronavirus) Delta variant. Doing so is a moral imperative."

The top program, Biden's team says, is HUD's Emergency Rental Assistance Program, with $25 billion available, but through the states. Tenants retort the states are sitting on their hands.

To symbolize urgency, and to try to push her colleagues to act, first-term Rep. Cori Bush, D-Mo., a "Squad" member and the first Black Lives Matter activist elected to Congress, camped out on the U.S. Capitol steps. As of 6 am on August 2, she was still there.

"5 a.m. this morning felt cold, like the wind was blowing straight through my sleeping bag. Since Friday–when some colleagues chose early vacation over voting to prevent evictions–we've been at the Capitol. It's an eviction emergency. Our people need an eviction moratorium. Now."

In a prior tweet, she called it "surreal" to be homeless, in a way, again, as she was several years ago when she was evicted and had to sleep in her car, along with her two kids.

"Last night, we stood on the steps of the Capitol in a moment of silence for all the people who are unhoused whose lives have been taken because of policy violence. For all of those whose lives will be at risk until the eviction moratorium is extended. We need to save lives," Bush tweeted before settling down for the night there."

Evictions started weeks ago

"The evictions process started weeks before the expiration of this moratorium and on Sunday (August 1) there will be families and children who will end up getting evicted in the middle of a housing crisis with no place to go. I am worried about the children who will be evicted and unable to enroll in school, or who will be forced to change schools, if the family can even find a place to live," Waters told her colleagues.

"We already know that Black, Brown, and low-income communities are some of the hardest hit by the pandemic and threats of eviction. I believe that without eviction protections, homelessness will only increase and families will be more vulnerable to this Delta variant, which has proven to be more contagious and deadly."

The states are sitting on their hands, too. Congress has OKd some $47 billion in federal coronavirus-related rental aid, but only $3.5 billion or so has reached the states.

"Sane people are all blinking twice down here in Florida. Please send help if you can see this. Our governor only gave out 2% of assistance funds," Caja Kelly tweeted to Bush. Gov. Ron DeSantis, R-Fla., is a right-wing Donald Trump follower who's pondering a White House run in 2024.

And 'Fed up mom" tweeted in reply to both Bush and Kelly that "Yep…I have had a 'Submitted' application for well over a month. If you call @Our_FL_Relief they just tell you to wait."

But it's not just GOP-led states that won't shovel rental aid out the door to threatened tenants. A coalition of more than 25 New York state pro-housing and pro-worker groups wrote lawmakers that the Democratic Cuomo administration there isn't moving, either.

"From day one, the implementation of the Emergency Rent Relief Assistance Program (ERAP) has been riddled with numerous flaws that make it harder for tenants to apply for and obtain aid," the Housing Justice For All coalition wrote Cuomo. "This failure on the part of your agency, the Office of Temporary and Disability Assistance, undermines New York State's ability to ensure that $2.7 billion in federal rent relief actually reaches tenants and families hit hardest by Covid.

"An estimated 1.2 million New Yorkers owe back rent because Covid destroyed their jobs and incomes.  It's clear from what we are seeing and hearing on the ground that many New Yorkers eligible for this emergency rent relief assistance are unable to access it. The online portal for ERAP is too difficult to navigate. ERAP must be fixed quickly so relief funds are distributed to the more  than  1 million New Yorkers who are saddled with rent debt and desperately need financial help."

The National Low-Income Housing Coalition summed up the situation and laid the blame on Biden and Congress.

"The White House punted responsibility for extending the federal eviction moratorium to Congress, 48 hours before its expiration, stating that the CDC could not extend it after the Supreme Court tied its hands," President Diane Yentel said. "This evening, after a last-ditch and ultimately failed effort by Democrats to extend the moratorium, the House left for summer break."

Yentel thanked Waters "and so many of you" for trying to extend the moratorium. "But the inaction of others put the lives of renters at risk and threatens our collective public health."

 -- via my feedly newsfeed

NBER Summer Institute 2021 Round-up: Week 3 [feedly]

for those interested in wonkier aspects of important topical research funded by Equitable Growth, that made it to NBER Summer Institute. (NBER is arguably the most important body of economists, generally responsible for determining when recessions begin, or end. Plus a host of other research projects.)

NBER Summer Institute 2021 Round-up: Week 3
https://equitablegrowth.org/nber-summer-institute-2021-round-up-week-3/

On July 12, the National Bureau of Economic Research kicked off its summer institute, an annual 3-week conference featuring discussions and paper presentations on specific subfields of economics, including measuring poverty, the costs of climate change, and systemic discrimination among large employers. This year's NBER event is being held virtually due to the coronavirus pandemic and is being livestreamed on YouTube.

We're excited to see Equitable Growth's grantee network, Steering Committee, and Research Advisory Board and their research well-represented throughout the program. Below are abstracts (in no particular order) of some of the papers that caught the attention of Equitable Growth staff during the third and final week of the conference. Click here for a round-up from week 1, and here for the week 2 round-up.

"New Frontiers: The Origins and Content of New Work, 1940–2018"
David Autor, Massachusetts Institute of Technology, NBER, Equitable Growth grantee
Anna Salomons, Utrecht University, IZA, Equitable Growth grantee
Bryan Seegmiller, Massachusetts Institute of Technology, Equitable Growth grantee

Abstract: Recent theory stresses the role of new job types ("new work") in counterbalancing the erosive effect of task-displacing automation on labor demand. Drawing on a novel inventory of eight decades of new job titles linked to U.S. census microdata, we estimate that the majority of contemporary employment is found in new job tasks added since 1940, but that the locus of new task creation has shifted—from middle-paid production and clerical occupations in the first four post-WWII decades, to high-paid professional and, secondarily, low-paid services since 1980. We hypothesize that new tasks emerge in occupations where new innovations complement their outputs ("augmentation") or market size expands, while conversely, employment contracts in occupations where innovations substitute for labor inputs ("automation") or market size contracts. Leveraging proxies for output-augmenting and task-automating innovations built from a century of patent data and harnessing occupational demand shifts stemming from trade and demographic shocks, we show that new occupational tasks emerge in response to both positive demand shifts and augmenting innovations, but not in response to negative demand shifts or automation innovations. We document that the flow of both augmentation and automation innovations is positively correlated across occupations, yet these two faces of innovation have strongly countervailing relationships with occupational labor demand.

Note: This research was funded in part by Equitable Growth.

"Systemic Discrimination Among Large U.S. Employers"
Patrick M. Kline, University of California, Berkeley, Equitable Growth grantee
Evan K. Rose, University of Chicago
Christopher R. Walters, University of California, Berkeley

Abstract: We study the results of a massive nationwide correspondence experiment sending more than 83,000 fictitious applications with randomized characteristics to geographically dispersed jobs posted by 108 of the largest U.S. employers. Distinctively Black names reduce the probability of employer contact by 2.1 percentage points, relative to distinctively White names. The magnitude of this racial gap in contact rates differs substantially across firms, exhibiting a between-company standard deviation of 1.9 percentage points. Despite an insignificant average gap in contact rates between male and female applicants, we find a between-company standard deviation in gender contact gaps of 2.7 percentage points, revealing that some firms favor male applicants while others favor women. Company-specific racial contact gaps are temporally and spatially persistent, and negatively correlated with firm profitability, federal contractor status, and a measure of recruiting centralization. Discrimination exhibits little geographical dispersion, but two-digit industry explains roughly half of the cross-firm variation in both racial and gender contact gaps. Contact gaps are highly concentrated in particular companies, with firms in the top quintile of racial discrimination responsible for nearly half of lost contacts to Black applicants in the experiment. Controlling false discovery rates to the 5 percent level, 23 individual companies are found to discriminate against Black applicants. Our findings establish that systemic illegal discrimination is concentrated among a select set of large employers, many of which can be identified with high confidence using large-scale inference methods.

"Economic impacts of tipping points in the climate system"
Simon Dietz, London School of Economics and Political Science
James Rising, University of Delaware
Thomas Stoerk, London School of Economics and Political Science
Gernot Wagner, New York University, Equitable Growth grantee

Abstract: Climate scientists have long emphasized the importance of climate tipping points like thawing permafrost, ice sheet disintegration, and changes in atmospheric circulation. Yet, save for a few fragmented studies, climate economics has either ignored them, or represented them in highly stylized ways. We provide unified estimates of the economic impacts of all eight climate tipping points covered in the economic literature so far, using a meta-analytic integrated assessment model, or IAM, with a modular structure. The model includes national-level climate damages from rising temperatures and sea levels for 180 countries, calibrated on detailed econometric evidence and simulation 1 modelling. Collectively, climate tipping points increase the social cost of carbon, or SCC, by around 25 percent in our main specification. The distribution is positively skewed, however. We estimate an approximately 10 percent chance of climate tipping points more than doubling the SCC. Accordingly, climate tipping points increase global economic risk. A spatial analysis shows that they increase economic losses almost everywhere. The tipping points with the largest effects are dissociation of ocean methane hydrates and thawing permafrost. Most of our numbers are probable underestimates, given some tipping points, tipping point interactions, and impact channels have not been covered in the literature so far, but our method of structural meta-analysis means that future modelling of climate tipping points can be integrated with relative ease, and we present a reduced-form tipping points damage function that could be incorporated in other IAMs.

"Collective Bargaining, the Minimum Wage, and the Racial Earnings Gap: Evidence from Brazil"
Ellora Derenoncourt, Princeton University, Equitable Growth grantee
François Gerard, Queen Mary University of London
Lorenzo Lagos, Brown University
Claire Montialoux, University of California, Berkeley, Equitable Growth grantee

Abstract: This paper studies how a national minimum wage and firm- and sector-specific wage floors affect racial earnings disparities. Our context is the Brazilian economy, characterized by persistently high racial disparities, a tradition of extensive sectoral bargaining, and the availability of detailed labor force surveys and administrative matched employer-employee data with information on race. We first analyze the effect of the large increase in the minimum wage that occurred between 1999 and 2009. Using a variety of research designs and identification strategies, we obtain three main findings. First, the increase in the minimum wage erased the racial earnings gap up to the 10th percentile of the national wage distribution and up to the 30th percentile in the poorest region, the Northeast. Second, there is no evidence of a significant reallocation of workers from the formal sector to the informal sector. This can be explained by the fact that the minimum wage is de facto binding in the informal sector (with the exception of agriculture, domestic workers, and the self-employed). Third, we do not find evidence of significant disemployment effects, or of Whites-non-Whites labor-labor substitution. As a result, the minimum wage increases of the 2000s led to a large decline in the economywide racial income gap in Brazil. The second part of the paper studies the effect of negotiated firm- and sector-specific wage floors. Our preliminary results suggest a more nuanced picture. First, within firms, non-White workers appear slightly more likely to be in occupations not covered by a wage floor. Second, we find significant dynamic effects of the introduction of wage floors on the composition of the workforce, with a growing employment share in occupations not covered by wage floors in subsequent years. Taken together, these results suggest that comprehensive and uniform labor standards such as the minimum wage may be among the most powerful labor market institutions to reduce racial earnings disparities.

Note: This abstract is from an earlier version of this paper. For updated details, please click here.

"The Signaling Role of Parental Leave"
Linh T. Tô, Boston University, Equitable Growth grantee

Abstract: I examine the signaling role of workers' parental leave choices theoretically and empirically. Motivated by the correlation between longer parental leave duration and a higher labor market penalty associated with the event of childbirth, the model posits that firms infer private information about future labor market choices or productivity of mothers through their choice of forgoing paid leave to return to work early. In equilibrium, mothers take into account firms' beliefs in deciding their leave choices, with direct consequences on their wages. The model delivers distinct predictions of the signaling channel of parental leave when there is an exogenous change in the maximum allowed paid leave duration. The empirical tests leverage unanticipated parental leave extensions in Denmark and administrative longitudinal data consisting of labor market information and precise leave duration. Consistent with the model's predictions, the leave extension (1) shifts up the leave distribution of mothers for whom the previously lower maximum duration would not have been binding; (2) has a positive wage impact on mothers who would have pooled at the maximum allowed leave before the extension but not after the extension; and (3) has a negative wage impact on mothers who would have pooled at the maximum allowed leave both before and after the leave extension. The results emphasize that relative, rather than absolute, leave duration can have direct long-term labor market consequences.

Note: This abstract is from an earlier version of this paper.

"Legal Representation in Disability Claims"
Hilary Hoynes, University of California, Berkeley, NBER, Equitable Growth Steering Committee member
Nicole Maestas, Harvard University, NBER
Alexander Strand, Social Security Administration

Abstract: Legal representatives play a large and growing role in the Social Security Disability Insurance adjudication process, earning fees totaling $1.2 billion in 2019. Long ubiquitous in appellate hearings, disability representatives—including attorneys and nonattorneys—have begun appearing more frequently at the beginning of cases, during the initial review. This development has raised questions about the motives of disability law firms, which are sometimes perceived to prioritize their own interests in response to incentives in the fee structure set by the Social Security Administration. At the same time, these concerns have revealed just how little is understood about the value of legal representation for claimants in disability cases. We comprehensively investigate the impact of legal representation on case outcomes when representatives are engaged from the initial stage. Our analysis is made possible by new administrative data identifying representatives appointed to disability claims at the initial and appellate levels. To address selection into representation, we instrument for initial representation using geographic and temporal variation in disability law firm market shares in the closely related but distinct appellate market. Among applicants on the margin of obtaining representation at the initial level, representation improves case outcomes and administrative efficiency across several metrics. Legal representation increases the probability of initial award by 23 percentage points, reduces the probability of appeal by 60 points, and induces no detectable change in the ultimate probability of award (including appeals). This pattern indicates that legal representation in the initial stage leads to earlier disability awards to individuals who would otherwise be awarded benefits only on appeal. Furthermore, by securing earlier awards and discouraging unsupported appeals, representation reduces total case processing time by nearly 1 year. Our analysis explores several mechanisms.

"The Economic Geography of Global Warming"
José-Luis Cruz, Princeton University
Esteban Rossi-Hansberg, University of Chicago

Abstract: Global warming is a worldwide and protracted phenomenon with heterogeneous local economic effects. In order to evaluate the aggregate and local economic consequences of higher temperatures, we propose a dynamic economic assessment model of the world economy with high spatial resolution. Our model features a number of mechanisms through which individuals can adapt to global warming, including costly trade and migration, and local technological innovations and natality rates. We quantify the model at a 1 degree × 1 degree resolution and estimate damage functions that determine the impact of temperature changes on a region's fundamental productivity and amenities depending on local temperatures. Our baseline results show welfare losses as large as 19 percent in parts of Africa and Latin America but also high heterogeneity across locations, with northern regions in Siberia, Canada, and Alaska experiencing gains. Our results indicate large uncertainty about average welfare effects and point to migration and, to a lesser extent, innovation as important adaptation mechanisms. We use the model to assess the impact of carbon taxes, abatement technologies, and clean energy subsidies. Carbon taxes delay consumption of fossil fuels and help flatten the temperature curve but are much more effective when an abatement technology is forthcoming.

"Firms and Unemployment Insurance Take-Up"
Marta Lachowska, W.E. Upjohn Institute for Employment Research, Equitable Growth grantee
Isaac Sorkin, Stanford University, NBER
Stephen A. Woodbury, Michigan State University, W.E. Upjohn Institute, Equitable Growth grantee

Abstract: This paper uses administrative data from Washington state to quantify the role of employers in the incomplete take-up of Unemployment Insurance, or UI. Consistent with previous literature, we find that nearly half of the workers who appear to be UI-eligible do not claim UI. Moreover, we also find a steep income gradient in claiming. Distinctively, we find substantial dispersion in both firm-level UI claim rates and appeals (of UI claims) rates. Firm-level claim and appeals rates are negatively correlated, which is consistent with a deterrent effect of firms' appeals on workers' claiming. We also find that claims and appeals rates are tightly related to workers' pre-separation wage rates, and that firm fixed effects explain a large share of the income gradient in take-up and appeals. We show that if firms with below-median firm effects in claims rates had the median claims rate, then take-up would increase by about 6 percentage points. We estimate a simple model of experience rating and claims, and use it to discuss some targeting properties of UI and find the changes in experience rating that would achieve similar increases in take-up.  

"Pollution and acquisition: Emissions and distributional effects of mergers"
Irene Jacqz, Harvard University, Iowa State University

Abstract: I estimate the effect of corporate acquisitions on facility-level toxic air pollution and its firm-level distribution. I use event study designs that exploit variation in the timing of acquisition among target facilities, since acquisition is endogenous to the operation and emissions of polluting facilities. I find emissions fall dramatically in the years after an acquisition among Toxic Release Inventory-reporting facilities in the United States for the period 2001–2019 and suggest changes in plant-level operations drive observed decreases. I also find evidence of increased inequality in emissions among target plants after acquisition and shifts in pollution toward less-advantaged neighborhoods. These findings suggest consolidation in sectors with negative externalities may reduce levels of the externality but increase inequality in its exposure.

"The Intergenerational Transmission of Employers and the Earnings of Young Workers"
Matthew Staiger, University of Maryland, former Equitable Growth Dissertation Scholar

Abstract: This paper investigates how the earnings of young workers are affected by the intergenerational transmission of employers, which refers to individuals working for the same employer as a parent. My analysis of survey and administrative data from the United States indicates that 7 percent of young workers find their first stable job at the same employer as a parent. Using an instrumental variables strategy that exploits exogenous variation in the availability of jobs at the parent's employer, I estimate that working for the same employer as a parent increases initial earnings by 31 percent. The earnings benefits are attributable to parents providing access to higher-paying employers. Individuals with higher-earning parents are more likely to work for the employer of their parent and experience greater earnings benefits conditional on doing so. Thus, the intergenerational transmission of employers amplifies the extent to which earnings persist from one generation to the next. Specifically, the elasticity of the initial earnings of an individual with respect to the earnings of their parents would be 10 percent lower if no one worked for the employer of a parent.

"Worker Beliefs About Rents and Outside Options"
Simon Jäger, Massachusetts Institute of Technology, Equitable Growth grantee
Christopher Roth,University of Cologne
Nina Roussille, London School of Economics and Political Science
Benjamin Schoefer, University of California,Berkeley, Equitable Growth grantee

Abstract: We measure workers' beliefs about rents and outside options in a representative sample of German workers and compare these beliefs with proxies for actual outside options. While subjective worker rents are large—14 percent of salary, on average—they do not stem from workers' subjective wage premia at their current firm, but are entirely derived from nonwage amenities. When comparing workers' subjective outside options against objective measures of pay premia from matched employer-employee data, we find that many workers mistakenly believe their current wage is representative of the external labor market—objectively low-paid (high-paid) workers are overpessimistic (overoptimistic) about their outside options. If workers had correct beliefs about outside options, 13 percent of jobs would not be viable at current wages, concentrated in the low-wage segment of the labor market. Finally, we show that in an equilibrium model, misinformation about outside options gives employers monopsony power.

"What Drives Prescription Opioid Abuse? Evidence from Migration"
Amy Finkelstein, Massachusetts Institute of Technology, NBER, Equitable Growth grantee
Matthew Gentzkow, Stanford University, NBER
Dean Li, Massachusetts Institute of Technology
Heidi Williams, Stanford University, NBER, Equitable Growth grantee

Abstract: We investigate the role of person- and place-specific factors in the opioid epidemic by developing and estimating a dynamic model of prescription opioid abuse. We estimate the model using the relationship between cross-state migration and prescription opioid abuse among adults receiving federal disability insurance from 2006 to 2015. Event studies suggest that moving to a state with a 3.5 percentage point higher rate of opioid abuse (roughly the difference between the 20th and 80th percentile states) increases the probability of abuse by 1 percentage point on-impact, followed by an additional increase of 0.3 percentage points per subsequent year. Model estimates imply large place effects in both the likelihood of transitioning to addiction and the availability of prescription opioids to the addicted. Equalizing place-based factors would have reduced the geographic variation in opioid abuse by about 50 percent over our 10-year study period. Reducing place effects on addiction transitions to the 25th percentile would have twice the impact on opioid abuse after 10 years as the analogous reduction in place effects on availability to addicts, though the comparison is reversed in the first few years.

"The Great Migration and Educational Opportunity"
Cavit Baran, Princeton University
Eric Chyn, Dartmouth College, NBER, Equitable Growth grantee

Abstract: This paper studies the impact of the Great Migration on children. We use the complete count 1940 census to estimate selection-corrected place effects on education for children of Black migrants. On average, Black children gained 0.8 years of schooling (12 percent) by moving from the South to North. Many counties that had the strongest positive impacts on children during the 1940s offer relatively poor opportunities for Black youth today. Opportunities for Black children were greater in places with more schooling investment, stronger labor market opportunities for Black adults, more social capital, and less crime.

The post NBER Summer Institute 2021 Round-up: Week 3 appeared first on Equitable Growth.

 -- via my feedly newsfeed

Matthew Yglesias: Amtrak should bring in foreign experts to make trains great again

Amtrak should bring in foreign experts  to make trains great again We're on the verge of a transformative investment — or $30 billion in waste

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John CasePerhaps not surprisingly given that Joe Biden is president, the Bipartisan Immigration Framework that seems likely to become law is a big win for Amtrak. Mainline rail in the United States is getting $66 billion, of which roughly $30 billion is destined to go to the Northeast Corridor.

This is great to see. Railfans sometimes go crazy drawing lines on a map, but the Northeast Corridor is by far the most promising corridor for investment. What's more, the next most promising investments are essentially bolt-ons to a hypothetical NEC high-speed rail system. In other words, if you already had a 3:30 trip from D.C. to Boston, then the case for a fast Pittsburgh-to-Philadelphia connection suddenly looks a lot more compelling because you get the northward connections to New York and Boston for free.

The other thing that's great about this is that $30 billion really ought to be enough to make a genuinely transformative investment in the NEC. That's about $40 million per kilometer of distance. In Spain they've built high-speed rail for an average of $21 million per km, and in France it's $30 million. And in theory, an NEC HSR project should be on the cheap side comparatively because most of the existing track is fine. Running the trains faster is a non-trivial project that requires building some new, straighter segments, addressing some bridge/tunnel issues, installing some constant-tension catenaries, and other things. It's not trivial. But it's not actually a 735-kilometer track construction project.

Alon Levy and Eric Goldwyn of the Transit Costs Project have studied the issues and think it should be doable for about $15 billion. They are also actively seeking grant money to do this work in more detail and write up a proper proposal. So if you know any rich people, please forward this to them. Alternatively, Pete Buttigieg should hire Alon as a special advisor at DOT to red team Amtrak's plans. Because as Henry Grabar points out, while $30 billion should be a game-changing investment in the Northeast Corridor, the actual plan from Amtrak is to spend about $30 billion on one tunnel under the Hudson River.

This raises a larger issue about Amtrak, namely that this is an institution that has no idea what it's doing. A game-changing investment requires changing the game — I would say by bringing in a number of executives from foreign passenger railroads that have actual experience running modern operations and supervising successful construction projects.

Amtrak is a mess

I sometimes like to tell the story of the time an Amtrak executive told me "to be honest, I don't know that much about trains." Then sometimes I feel bad about it, because it's not like the guy's job involved supervising the operation of trains.

But then I think about it more, and I genuinely don't think it's a cheap shot. The specific context is he had a complaint about the MARC Penn Line and I said he should take it up with his colleagues. He was confused. Then I was confused. Then it emerged that he didn't realize Amtrak operates the MARC Penn Line (under contract with the Maryland Transit Administration), so he was complaining about his own organization's operations. He shrugged and said the thing about not knowing too much about trains.

And I think this is emblematic of Amtrak. It is run by people who are not curious about trains.

In March, Grabar interviewed Amtrak's new CEO, William Flynn, and he asked him about the cost of the Gateway project "which is almost $5 billion a mile, and that's many times the cost of similar projects in other countries. This is a recurring issue, as I'm sure you know, in tri-state area projects, where the cost is way out of whack with international best practices. What's going on there?"

Flynn just has no answer for this. He doesn't say "look, there's a good reason and here it is." And he also doesn't say it's a big problem and he's working on fixing it. And he also doesn't say he finds it puzzling and he's looking into it. He just reiterates that he thinks the project is important.

This is a recurring issue. After years of me blogging about Amtrak's odd boarding procedures, we finally got an Inspector-General inquiry into it, but all the IG turned up was that nobody could explain why they do what they do. Amtrak officials had previously represented to me that it's a security requirement but could not provide further details. They didn't want to lie to the IG so they admitted this isn't really the reason. But they didn't come up with a reason. And then they also didn't change the process.

They spent $1.6 billion on a new train station in New York that I previously characterized as having no positive impact on transportation. Several friends noted to me that Moynihan Station actually makes transportation worse because it's further west and puts the trains further from most midtown jobs and the 1/2/3 Subway lines. There's a desperate need to bring people in from the outside who have real knowledge and can start answering these questions or cleaning house until jobs are filled with people who can answer them.

The case for a foreign CEO

In what I think is an implicit admission that Amtrak doesn't know what it's doing, whenever a CEO steps down, he's never replaced by an internal candidate.

What we get instead is a freight rail guy like Charles Moorman, or an airline guy like Richard Anderson, or the new guy, Flynn, who has experience with both airlines and freight.

But it's not like anyone in the world thinks the United States of America is a global leader in intercity passenger rail or that Amtrak is the world's premier passenger railroad operator. What we are is a big rich country that can afford to spend some money to bring some folks in from better intercity passenger railroads abroad and have them try to fix things. Now unfortunately none of the other English-speaking countries are world leaders in passenger rail either. But English is a pretty widely spoken language. I refuse to believe that you couldn't find a handful of English-speakers who'd be interested in a challenge if you shake the trees of the guys near the top of the French, Spanish, Italian, Japanese, Korean, etc. railroads.

What you'd be looking for is exactly what we don't have at Amtrak — namely someone with real experience understanding what success looks like and genuine curiosity about the situation.

The Byford precedent

I believe we have a successful template for success in Andy Byford's run at the MTA in New York.

New York officials did something unusual and brought in an outsider with experience working in foreign countries that are more transit-oriented to try to fix up a troubled operation. And as best I can tell, it was working. The subway's speed and reliability improved, problems were getting fixed, things were happening, and people were praising Andy Byford.

This then led to two problems.

One is that when you bring a skilled outsider in, he starts fixing some stuff and gaining credibility. But he also starts identifying stuff that for some reason or other he can't fix and starts saying things like "I can't fix this because of X Rule or Y Person or whatever we else." Lifetime managers of dysfunctional systems learn to just live with these points of dysfunction, but outsiders have fresh eyes and they say "this is not how a world-class system would work."

At that point you start making enemies, and either the politicians have your back or they don't.

And in New York, they didn't, seemingly in part because Andrew Cuomo was annoyed that Byford was getting so much praise. There were these "train daddy" memes and people were saying he was fixing the subway. Cuomo didn't like that, and he was pushed out. The MTA has been in limbo ever since, kind of loosely overseen by Sarah Feinberg — a Democratic Party political operative who kind of backed into transit accidentally during Obama's second term.

What I take from this is that an effort to make Amtrak good would probably fail because the relevant elected officials probably don't actually want to make it good. But if they did want to make it good, then they could bring in an experienced passenger rail executive from a high-functioning European system and empower him to do some house-cleaning. It would be risky, but it would also be ambitious. This would say not just that the Biden administration is interesting in spending a lot of money on mainline rail, but that they actually want to create excellent passenger rail in the United States.

The case for ambition

Unfortunately, rail dialogue in the United States tends to get polarized between fantasists and plane-haters doing things like drawing lines between Kansas City and Denver versus people who dismiss the whole country as geographically unsuited to intercity rail.

The truth is that the United States is just really big. Most of the country does not have nice sandy beaches. But America also has lots of nice sandy beaches. Beach towns, oceanfront real estate, Olympic beach volleyball teams, etc. are all important parts of American culture, and it's good to have good beaches notwithstanding the fact that most of the country isn't near the water.

If you look at the D.C./Philly/NYC/Boston corridor, you see a swathe of land containing nearly one-sixth of the nation's population and more than that of its economic output. This swathe of land is mostly very dense. Its main cities have strong downtowns and real mass transit systems that make it attractive to arrive in the central city rather than a peripheral airport. And the smaller cities on this route (Baltimore, Wilmington, New Haven, Providence) are old, have traditional downtowns, and are often poorly served by airports.

All of which is to say that while I think advocates tend to get detached from reality when they draw their maps, there's nothing unrealistic about the idea of first-class passenger rail in the Northeast Corridor.

Italy has 60 million residents to the NEC's 50 million. The populations get even closer if you throw out the 5 million or so living on Sardinia or Sicily. The main Italian high-speed rail route from Salerno through Naples, Rome, Florence, and Bologna then onto Milan runs about 500 miles. The current NEC is 457 miles of track.

But Italy's high-speed rail network (which, as I understand it, excludes a lot of the Italian rail system that has a lot of slower trains on legacy routes as well) carried about twice as many passengers pre-pandemic as all of Amtrak. And really, when you dig further in, the numbers should be more in America's favor. Italy's two biggest metro areas, Rome and Milan, are about Boston-sized — New York, Philadelphia, and D.C. are all bigger.

An ambition that makes a lot of sense for the United States is to generate Italian levels of ridership in that key zone. And that means bringing in foreign experts, asking tough questions, and improving operations.

A plausible daydream

This is all obviously a bit unlikely. Biden has been involved in Amtrak for decades and always seems to have seen his role as a booster rather than as a reformer.

But this big rail investment does raise some fundamental questions. He's the president of the United States right now, not a senator from Delaware. Bringing home some pork isn't a particularly impressive achievement. Building a successful Northeast Corridor would be. The money Biden wrung out of the legislative process here is enough to become a significant legacy item. But absent reform, his $30 billion is going to vanish into the State of Good Repair maw instead. I think presidents want to accomplish memorable things, and in this case, we're on the verge — but only if we get reform.

The other relevant actor is Buttigieg, who I assume at the age of 39 hasn't given up his presidential aspirations yet.

You know my advice to Kamala Harris, which is premised on the observation that she's on autopilot to receive the nomination. Buttigieg's not like that. Everyone likes him. He's a "rising star." He went from obscure mayor to cabinet secretary in the flash of an eye. But it's still not obvious how you go from Secretary of Transportation to president. It seems like accomplishing something noteworthy and unusual might be the answer.

Harpers Ferry, WV

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