Assignment:
I. Empirical Research Questions - Research Methods
1. Suppose you have a sample of children ranging from 5 to 18 years of age. You run a regression of math scores on height and get a statistically significant positive coefficient estimate. Your re- search assistant concludes that height has a causal effect on mathematical ability - being taller makes children better at math. Bad luck for everyone who is short. Would you agree with your research assistant's interpretation of the regression results? If so, explain why. If not, offer a more likely explanation for the positive correlation and suggest how you could alter your regression to address this.
II. Current Policy Issues: A quasi-randomly selected All answers should be clear and to the point. Use well-labeled graphs or equations as needed to support your answers.
1. Case and Deaton (2015) note that morbidity and mortality rates have recently increased for U.S. white, non-Hispanics, ages 45-54. This runs opposite the general trend of falling death rates among other demographic groups and across other developed countries.
1. (a) What are the main causes of death that the authors find have been increasing for this demo- graphic group (U.S. whites ages 45-54)?
2. (b) Given the cited causes of death, offer one possible explanation or cause of this trend in mortality and morbidity among whites ages 45-54.
3. (c) Make a specific suggestion for how you could use data to test if your suggested explanation in (b) is a driving force behind this trend. Briefly explain your proposed method.
2. Economists Daren Acemoglu and Pascual Restrepo write in reference to automation, "I still be- lieve there will be jobs in the years in the years to come, though probably not as many as we have today... but the data have me worried about the communities directly exposed to robots... it's going to take a very long time for these communities to recover." Economist David Autor recognizes the value of Acemoglu and Restrepo's work, but maintains that throughout history inventions have replaced human labor but the economy has not run out of work.
1. (a) Briefly explain the economic reasoning behind David Autor's observation that throughout history there has always been work, despite numerous technological advances. Specifically, as Autor puts it, "why are there still so many jobs?"
2. (b) Briefly explain the economic reasoning behind why Acemoglu and Restrepo agree that wages and employment may recover on aggregate, but not in local communities.
3. (c) Given these two economic perspectives, recommend one specific policy (which could in- clude multiple facets, or could be to do nothing) in response to the increased use of robots in the production of goods and services. Provide a brief justification for your proposed policy that addresses both its benefits and the associated costs.
3. President Trump continues to engage in a "trade war" with China.
1. (a) Briefly explain what it means to say we are engaged in a "trade war" with China and what outcome the U.S. is hoping to achieve.
2. (b) Discuss the overall effects of the "trade war" on (i) U.S. firms, (ii) U.S. consumers, and (iii) net U.S. welfare. Be sure to make appropriate distinctions regarding different types of firms in the economy.
3. (c) As an economic policy adviser to the President, would you support protectionist policies? Or, would you advocate for freer trade? Are there certain conditions or other policies that must be paired with free-trade deals before you would recommend supporting them? Briefly justify your answer using appropriate economic analysis. A well-justified answer should acknowledge arguments on both sides of the issue.
4. Behavioral economists observe something known as the "privacy paradox."
1. (a) Briefly explain what the "privacy paradox" is and how it arises.
2. (b) Give one specific example of a behavior that illustrates the "privacy paradox."
3. (c) Offer one specific solution that could help align behaviors with preferences in the context of online privacy. Briefly explain how your proposed solution achieves its objective.
5. Pure applies to the electronic collection and use of personal data by companies economic theory suggests that full-information is efficient.
Consider this statement as it
1. (a) Briefly discuss one market failure in the market for personal data that suggests the above statement may be incorrect.
2. (b) Briefly discuss one economic benefit and one economic cost to consumers created by com- panies having access to personal data.
3. (c) To what extent do you think the federal government should intervene and regulate the market for electronic collection and use of personal data? Offer a concrete policy recommendation, and support your answer with a well-justified argument.
6. In 2010, the U.S. implemented the Patient Protection and Affordable Care Act (ACA).
1. (a) Briefly summarize the two policy objectives of the law. At this point in time, has the law successfully achieved its objectives? Briefly explain how you arrive at this conclusion.
2. (b) Identify and explain two market failures that exist in the market for health insurance. How (if at all) does the ACA address these market failures? Briefly explain your answer.
7. A number of policymakers (Democrats and Republicans) have proposed reforms to the Patient Protection and Affordable Care Act (ACA).
1. (a) "The Future of U.S. Healthcare: Revise or Reform the Affordable Care Act," an article produced by the research think thank RAND, highlights a number of key tensions in health policy goals. State one of these key trade-offs and use clear economic logic to explain why it is difficult to achieve both objectives.
2. (b) Given the variety of policy reforms being considered, many of which are summarized in the article from (a), offer a clear policym recommendation for reforming the ACA (which could include multiple facets or doing nothing). Provide a brief argument in favor of your proposed reform. While your argument may include social considerations, it should also be supported by economic reasoning. A strong argument should acknowledge both benefits and associated costs of your proposed reform.
8. A number of well-known economists have recently signed a petition calling for a carbon tax to address climate change.
1. (a) Brieflyexplaintheeconomictheorybehindhowacarbontaxhelpstoreduceclimatechange.
2. (b) Discuss one benefit of implementing a carbon tax relative to other mechanisms that address climate change. Be specific in the alternative mechanisms to which you are comparing the carbon tax.
3. (c) Provideoneconcerntoimplementingacarbontax,anddiscusswhethertheeconomistspro- pose a viable solution to this concern.
9. Climate change has become an issue of growing concern.
1. (a) Briefly discuss one specific benefit and one specific cost of reducing greenhouse gas emis- sions.
2. (b) Briefly explain why voluntary actions taken at an individual or firm level are unlikely to bring about significant reductions in greenhouse gas emissions? Do the same arguments hold for an individual country?
3. (c) The Green New Deal, among other things, proposes to substantially reform the U.S. energy grid. One think tank estimates the proposed energy reforms will cost $700 billion to $1 trillion per year. The United Nations estimates allowing a 2-degree Celsius increase in tem- perature will cost the world economy $69 trillion by 2100, while allowing only a 1.5-degree Celsius increase will cost the world economy $54 trillion. Considering these specific num- bers, and thinking more generally, how does one appropriately weigh current costs against future benefits? (E.g., how much "should" we be willing to spend to save a specific amount of money 80 years in the future?) Provide clear economic reasoning behind your answer.
10. Economist Olivier Blanchard recently stated, "So let me repeat: Public debt is bad, it is not catastrophic. It can be used but it should be used right."
1. (a) Briefly explain what the U.S. national debt is, and how it arises.
2. (b) What does Blanchard mean by this quote? In particular, clearly explain the conditions under which Blanchard argues that debt is "not catastrophic."
3. (c) Blanchard suggests that debt should be used "right." Provide (i) a clear and feasible set of rules or criteria for evaluating whether a policy proposal that increases national debt should be approved. And, (ii) briefly justify your proposed criteria. While you may cite moral and social concerns, you must also provide clear economic reasoning to justify your proposed criteria.
11. There is a common quote in support of immigration: "Immigrants do jobs that natives don't want to do."
1. (a) Economist George Borjas claims this way of thinking ignores the concept of supply and demand. Correct the quote, as Borjas does, to take into account the role of markets. Using the concept of supply and demand, briefly explain the key correction that Borjas makes to the quote.
2. (b) Despite the theory alluded to in (a), a number of economists disagree with Borjas' conclu- sions. Still using the concept of supply and demand, provide a clear economic explanation for why immigrants may have negligible effects on wages and employment of natives.
3. (c) While the theory discussed in (a) and (b) is ambiguous, empirical research also finds mixed results. Briefly discuss one key difference in markets or methodology that helps to explain these different empirical findings.
12. There remains considerable debate regarding whether the U.S. should pursue (i) pro-immigration policies for both low-skill and high-skill immigrants, or whether immigration policy should (ii) target high-skill immigrants only.
1. (a) Based on economic theory and empirical evidence, briefly discuss the expected labor market effects on different types of native workers under each approach to immigration.
2. (b) Based on economic theory and empirical evidence, briefly discuss the expected fiscal effects on federal, state, and local governments under each approach to immigration.
3. (c) As an economic policy advisor, considering the answers above, which of the two approaches to immigration policy would you recommend? In addition, would you recommend pairing the immigration policy with any other specific policy? If so, what? Briefly explain your answers.