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The Long-Run Effects of Disruptive Peers
(Private Enterprise Research Center, Texas A&M University, 2017-01-01) Hoekstra, Mark; Carrell, Scott E.; Kuka, Elira
There's a great deal of research on how classmates can affect test scores and discipline in school, but what about later in life? In Working Paper 1605, PERC's Rex Grey Professor of Economics Mark Hoekstra, Scott E. Carrell of UC Davis, and Elira Kuka of Southern Methodist University, look at the long-term impact of childhood peers, particularly with respect to labor market outcomes in adulthood.
Vehicle Miles (Not) Traveled: Fuel Economy Requirements, Vehicle Characteristics, and Household Driving
(Private Enterprise Research Center, Texas A&M University, 2017-01-01) Puller, Steven; West, Jeremy; Meer, Jonathan
Simply put, the less Americans drive, the less gas they use. More driving, more gas. The negative effects of gasoline consumption are well-documented, ranging from local effects of automobile pollution on individuals' health to the global impact of vehicle emissions on climate change. So what makes households drive less? In Working Paper 1607, PERC's Rex Grey Professor Mark Hoekstra, PERC's Professor of Free Enterprise Steven L. Puller, UC Santa Cruz's Jeremy West, and Texas A&M University's Jonathan Meer, examine the effects of drivers' behaviors on gasoline consumption.
Red, Blue, and Purple
(Private Enterprise Research Center, Texas A&M University, 2017-01-16) Rettenmaier, Andrew J. and Saving, Thomas R.
This past November, President Donald Trump pulled off his unexpected victory by adding Florida, Iowa, Michigan, Ohio, Pennsylvania, and Wisconsin to the group of 24 red states Mitt Romney won in 2012. President Trump won with 304 electoral votes from 30 states. The last time Wisconsin voted Republican in a presidential election was in 1984. Pennsylvania and Michigan last voted Republican in 1988. What led these states to vote red? Pollsters tell us that Trump's views on trade, immigration, and his general populism resonated with enough voters in the swing states to nudge them to the Republican column. What is interesting about the three set of states is how they now differ economically and how the each fared over the past eight years. In the Winter 2017 edition of PERCspectives on Policy, PERC Executive Associate Director Andrew Rettenmaier, and PERC Director Thomas Saving examine the relationship between state population growth and the change in Republican vote share.
The Impact of College Diversity on Behavior Toward Minorities
(Private Enterprise Research Center, Texas A&M University, 2017-02-03) Hoekstra, Mark; Carrell, Scott E.; West, James E.
There is little question as to the lack of racial diversity at selective U.S. universities. However, there is considerable debate regarding the benets of various policy options to increase diversity. Proponents of race-conscious admissions policies argue that diversity benets both the majority and the minority, and that increasing interactions between groups will lead to improved relations. Critics of race-conscious admissions argue that targeted policies such as armative action are themselves a form of discrimination and can lead to diminished race relations, particularly if diverse candidates have lower admission standards. This paper estimates the impact of racial diversity on white males' subsequent behavior toward minorities. To overcome selection bias, we exploit data where students are randomly assigned to autonomous peer groups. Results show that white males randomly assigned to both a higher number as well as higher-aptitude black peers in their freshman year are more likely to match with a black roommate in their sophomore year, after reassignment to a new peer group with a dierent set of black peers. Importantly, exposure to more black peers particularly aects white males who come from more racially homogeneous (white) states.
Risk and Risk Aversion Effects in Contests with Contingent Payments
(Private Enterprise Research Center, Texas A&M University, 2017-03-01) Liu, Liqun; Meyer, Jack; Rettenmaier, Andrew J.; Saving, Thomas R.
Contests by their very nature involve risk, winning and losing are both possible, and the gain from winning can itself be uncertain. The participants in a contest use resources to increase their chance of winning. The main focus of this analysis is on the effects of risk aversion and risk in contests where only winners pay for resources used to compete. When payment is contingent on winning, the effect of risk aversion is in the opposite direction of what occurs when costs are paid by both winners and losers. A number of contests observed in the marketplace that exhibit this contingent payment property are discussed.
The Great Recession and Charitable Giving
(Private Enterprise Research Center, Texas A&M University, 2017-03-01) Meer, Jonathan; Miller, David; Wulfsberg, Elisa
The authors examine the impact of the Great Recession on charitable giving. Using the Panel Study of Income Dynamics, the authors estimate a variety of specifications and find sharp declines in overall don-ative behavior that is not accounted for by shocks to income or wealth. These results suggest that overall attitudes towards giving changed over this time period.
Does Strategic Ability Affect Efficiency? Evidence from Electricity Markets
(Private Enterprise Research Center, Texas A&M University, 2017-04-01) Puller, Steven L.; Luco, Fernando; Hortacsu, Ali; Zhu, Dongni
Even within the same market, firms vary across a number of dimension--structure, production capacity, market experience, and general core competency. If you go as far as to observe individual managers, you will find resumes with differing academic training and experience. It is easy to imagine how these differing backgrounds play a role in strategic decision making. In this study, the authors ask whether strategic ability affects efficienc
Prior Commitments
(Private Enterprise Research Center, Texas A&M University, 2017-05-01) Liu, Liqun; Andrew Rettenmaier and Thomas Saving
The US Government's total liabilities were $22.8 trillion in 2016. The liabilities include the familiar debt held by the public of $14.2 trillion. They also include the accrued pension and other retirement benefits payable to federal civilian and military employees of $7.2 trillion and $1.3 trillion in other liabilities. Altogether these official liabilities are 23% larger than GDP. But are the official liabilities the end of the story? Because retirees don't have a legal claim to their Social Security and Medicare, their accrued benefits are not included in the official liability tally. But if these accrued benefits--limited to just those payable to current retirees--were treated as liabilities they would add another $19.8 trillion to federal liabilities. This issue of PERCspectives on Policy explores the rationales for treating accrued Social Security and Medicare benefits payable to current retirees as comparable to the other official federal liabilities.
Peer Quality and Benefits to Attending Better Schools
(Private Enterprise Research Center, Texas A&M University, 2017-05-01) Hoekstra, Mark; Wang, Yaojing; Mounganie, Pierre
Despite strong demand for attending high schools with better peers, there is mixed evidence on whether doing so improves academic outcomes. The authors estimate the cognitive returns to high school quality using administrative data on a high-stakes college entrance exam in China.
The Border Adjustment Tax and Corporate Tax Reform
(Private Enterprise Research Center, Texas A&M University, 2017-05-01) Liu, Liqun; Saving, Thomas R.
Both House Republicans' 2016 tax plan and, more recently, President Trump's tax plan envision a rate cut for the corporate income tax (CIT): from the current 35% to 20% (the House plan) or 15% (the president's plan). To offset any potential revenue loss due to the CIT rate cut, some economists propose a border adjustment tax (BAT). The BAT based on a new 15% CIT is equivalent to shifting the 15% CIT from being entirely on exports to entirely on imports. Because we regularly run a trade deficit, the proponents of the BAT argue, some or all of the lost revenue caused by the CIT rate reduction can be recovered by the BAT. This study examines the role of the BAT in raising revenues. It finds that some previously neglected factors would significantly compromise the BAT's ability to generate net revenues, with or without a fully offsetting appreciation of the dollar. These factors include an increase in imports price, a decrease in exports price, and dollar appreciation's asymmetric effects on imports and exports, all of which work to reduce the trade deficit or even turn it into a surplus.
Does Strategic Ability Affect Efficiency?
(Private Enterprise Research Center, Texas A&M University, 2017-05-01) Puller, Steven; Luco, Fernando; Hortacsu, Ali; Zhu, Dongni
Even within the same market, firms vary across a number of dimensions:structure, production capacity, market experience, and general core competency. If you go as far as to observe individual managers, you will find resumes with differing academic training and experience. It is easy to imagine how these differing backgrounds play a role in strategic decision making. In this study, the authors ask whether strategic ability affects efficiency.
Interview with Dr. Joshua Rauh
(Private Enterprise Research Center, Texas A&M University, 2017-05-19) Rettenmaier, Andrew J.; Liu, Liqun
Dr. Liu, Dr. Rettenmaier and Dr. Saving interview Kirby Distinguished Visiting Professor Dr. Joshua Rauh during his visit to Texas A&M University.
Federal Liabilities: 2017 Update
(Private Enterprise Research Center, Texas A&M University, 2017-06-01) Liu, Liqun; Rettenmaier, Andrew J.; Saving, Thomas R.
The official federal liabilities of the United States federal government totaled $22.8 trillion as of September 30, 2016. They include the debt held by the public of $14.2 trillion, federal employees; accrued retirement benefits of $7.2 trillion, and various other categories round out the remainder. Not included in the official liabilities is a measure of accrued Social Security and Medicare benefits expected by workers and retirees even though these benefits are conceptually equivalent to federal employees; accrued benefits. Accrued Social Security and Medicare benefits are not included as liabilities because workers and retirees do not have a legal claim to the receipt of these benefits. However, we suggest adding a subset of these accrued benefits to the official liabilities. Specifically, the portion of accrued benefits payable to retirees are likely to be paid in full and they meet the definition of liabilities in that they are based on prior actions that will require future resources. This subset of benefits payable to retirees appear each year in the Financial Report of the United States Government in the Statements of Social Insurance, but not as liabilities. Social Security and Medicare benefits payable to current retirees produce an additional liability of $19.8 trillion, an amount that exceeds the debt held by the public and that is 87% of the size of the official liability measure. Together the official liabilities and the Social Security and Medicare benefits to be received by current retirees total $42.6 trillion, or 229% of GDP. This liability measure, combined with the forward-looking fiscal gap and unfunded obligation measures, provide policymakers with a comprehensive set of metrics that distinguish between existing federal commitments based on past actions and those that are contingent on continuing the programs in their current forms.
How Do Peers Influence BMI? Evidence from Randomly Assigned Classrooms in South Korea
(Private Enterprise Research Center, Texas A&M University, 2017-08-01) Meer, Jonathan; Lim, Jaegeum
Obesity among children is an important public health concern, and social networks may play a role in students' habits that increase the likelihood of being overweight. We examine data from South Korean middle schools, where students are randomly assigned to classrooms, and exploit the variation in peer body mass index. We use the number of peers siblings as an instrument to account for endogeneity concerns and measurement error. Heavier peers increase the likelihood that a student is heavier; there are no spurious correlations among attributes that are unlikely to have peer contagion. Public policy that targets obesity can have spillovers through social networks.
Persistent Effects of Teacher-Student Gender Matches
(Private Enterprise Research Center, Texas A&M University, 2017-08-23) Meer, Jonathan; Lim, Jaegeum
The authors exploit data from middle schools in Seoul, South Korea, where students and teachers are randomly assigned to classrooms, and find that female students taught by a female versus a male teacher score higher on standardized tests compared to male students even four years later. Also, findings show that having a female math teacher in 7th grade increases the likelihood that female students take higher-level math courses, aspire to a STEM degree, and attend a STEM-focused high school. These effects are driven by changes in students' attitudes and choices.
Texas Movers
(Private Enterprise Research Center, Texas A&M University, 2017-09-01) Rettenmaier, Andrew J.; Saving, Thomas R.
Population grows if migration into a state exceeds the migration out, combined with the natural increase of births over deaths. From 2010 - 2016, Texas had the largest population increase of any state, amassing almost 28 million residents. Who are these residents and where are they coming from? In the PERCspectives on Policy Fall 2017 edition, Andrew J. Rettenmaier and Thomas R. Saving explore migration trends, as well as adjusted gross income, for the state of Texas and its five largest commuting zones: Houston, Austin, Dallas, San Antonio and Fort Worth using data from the U.S. Census Bureau and the Internal Revenue Service.
Navigating the Earned Income Tax Credit
(Private Enterprise Research Center, Texas A&M University, 2017-09-01) Liu, Liqun; Rettenmaier, Andrew J.
The Earned Income Tax Credit (EITC) is the federal government's largest means-tested cash assistance program. The popular anti-poverty program's maximum credits and income eligibility ranges have been legislatively increased since its introduction in 1975. In 2014, the program distributed over $69 billion in tax credits to 25.8 million tax filers. This study examines the labor supply effects of the EITC, as well as how the distribution of earnings has changed during the years the program was expanded. The study focuses on the program's potential effects on employment, hours worked and annual earnings of women who are most likely to participate. Like other studies, this study finds that among women with less than college educations, participation in the labor market by single women with children has increased in response to expansions in the EITC program.Hours of work and annual earnings for this group have not increased relative to other single women with no children in the household, however. In general, earnings inequality among women with less than a college education has risen as has the share attributable to single women with children.
The Federal Reserve: Back to the Past
(Private Enterprise Research Center, Texas A&M University, 2017-10-01) Saving, Thomas R.
The Federal Reserve's payment of interest on bank reserves balances has transformed the balances to investments rather than just insurance against a run on the banking system. The paying of interest on reserves allowed the Federal Reserve to engage in an unprecedented increase in its assets without incurring significant inflation in the economy. The Federal Reserve recently announced that it will begin a gradual reduction in its asset portfolio. This reversal of the almost decade long increase in Federal Reserve assets will require a slow, but careful process. This process must account for the effect of the policy on the Federal Reserve's annual inflation target. In this study, the scale of the asset reduction required to return the Federal Reserve's assets to GDP ratio back to its pre-Great Recession level is measured. Using simple analysis, the magnitude of the problem and the factors that make the transition possible are estimated. This analysis demonstrates the wisdom of the slow approach envisioned by the Federal Reserve Board. Going forward, uncertainty about the future path of market interest rates is particularly important.
"Forecasting" Deficit Spending in the United States: A Look at Projections from the Congressional Budget Office
(Private Enterprise Research Center, Texas A&M University, 2017-10-01) Jansen, Dennis W.; Ross, Aaron
The Congressional Budget Office, or CBO, is the non-partisan government agency that provides projections of costs and revenues to Congress and the public. CBO projections are conditional forecasts of underlying economic drivers including GDP, potential GDP, and demographic variables. The CBO deficit projections, published semi-annually in the report, â€œThe Budget and Economic Outlookâ€� are then used by legislators to provide a framework for considering the future path of deficits without changes in current law, and subject to CBO projections of economic activity. However, when current law is constantly changing, the CBO deficit projections can be strikingly at variance with actual deficits. This article examines the 10-year deficit projections of the Congressional Budget Office from 2000 to 2017 and compares them to subsequent actual levels of deficit spending. Findings show that CBO projections have sometimes significantly underestimated the level and path of deficits, while they have not over this period significantly overestimated the level and path of deficits. Legislators and the public should take into account that CBO projections are, in this sense, an optimistic projection of future events.
How Do Peers Influence BMI?
(Private Enterprise Research Center, Texas A&M University, 2017-10-01) Meer, Jonathan; Lim, Jaegeum
Childhood obesity is a growing public health concern among many industrialized countries. Authors Meer and Lim present a clear view on the effect of social networks on BMI for adolescents from randomly-assigned seventh grade classrooms in Korea.

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