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  • Author: David Deming
  • Publication Date: 08-2019
  • Content Type: Working Paper
  • Institution: The John F. Kennedy School of Government at Harvard University
  • Abstract: Science, Technology, Engineering, and Math (STEM) jobs are a key contributor to economic growth and national competitiveness. Yet STEM workers are perceived to be in short supply. This paper shows that the “STEM shortage” phenomenon is explained by technological change, which introduces new job skills and makes old ones obsolete. We find that the initially high economic return to applied STEM degrees declines by more than 50 percent in the first decade of working life. This coincides with a rapid exit of college graduates from STEM occupations. Using detailed job vacancy data, we show that STEM jobs change especially quickly over time, leading to flatter age-earnings profiles as the skills of older cohorts became obsolete. Our findings highlight the importance of technology-specific skills in explaining life-cycle returns to education, and show that STEM jobs are the leading edge of technology diffusion in the labor market.
  • Topic: International Organization, International Political Economy, Science and Technology, Labor Issues
  • Political Geography: Global Focus
  • Author: Maciej Kotowski
  • Publication Date: 10-2019
  • Content Type: Working Paper
  • Institution: The John F. Kennedy School of Government at Harvard University
  • Abstract: This paper investigates the formation of production and trading networks in an economy with general interdependencies and complex property rights. The right to exclude,a core tenet of property, grants asset owners a form of monopoly power that influences granular economic interactions. Equilibrium networks reflect the distribution of these ownership claims. Inefficient production networks may endure in equilibrium as firms multi-source to mitigate hold-up risk. Short supply chains also reduce this risk, but may preclude the production of complex goods. A generalized Top Trading Cycles algorithm, applicable to a production economy, identifies equilibrium outcomes in the model. Such outcomes can be decentralized via a price system.
  • Topic: International Trade and Finance, International Affairs, Intellectual Property/Copyright, National & provincial initiatives
  • Political Geography: America
  • Author: John Gerard Ruggie
  • Publication Date: 08-2019
  • Content Type: Working Paper
  • Institution: The John F. Kennedy School of Government at Harvard University
  • Abstract: On August 19, 2019, the U.S. Business Roundtable (BR), comprising the CEOs of more than 200 of America’s largest corporations, issued a new mission statement on “the purpose of a corporation” (BR, 2019a). The press release noted that each periodic update on principles of corporate governance since 1997 had endorsed the principle of maximizing shareholder value. In contrast, the new statement commits signatory CEOs “to lead their companies for the benefit of all stakeholders – customers, employees, suppliers, communities and shareholders” (BR, 2019b). “[Milton] Friedman must be turning in his grave,” a Fortune magazine article declared (Murray, 2019)
  • Topic: International Affairs
  • Political Geography: Global Focus
  • Author: Richard Zeckhauser
  • Publication Date: 09-2019
  • Content Type: Working Paper
  • Institution: The John F. Kennedy School of Government at Harvard University
  • Abstract: This paper argues that historical analysis, necessarily written with hindsight, often underestimates the uncertainties of the past. We call this tendency explanation bias. This bias leads individuals – including professional historians – to imply greater certainty in causal analyses than the evidence justifies. Their analyses will treat what is plausible to be probable. We offer a few intuitions about why explanation bias exists, its relation to other well-established psychological biases, what it leads to, and how it might be combatted. Appreciating the depth of uncertainty and ignorance in our world is critical for accurately understanding, interpreting, and drawing from the past to illuminate the present and the near future
  • Topic: International Affairs
  • Political Geography: Global Focus
  • Author: Will Dobbie
  • Publication Date: 08-2019
  • Content Type: Working Paper
  • Institution: The John F. Kennedy School of Government at Harvard University
  • Abstract: We study the drivers of financial distress using a large-scale field experiment that offered randomly selected borrowers a combination of (i) immediate payment reductions to target short- run liquidity constraints and (ii) delayed interest write-downs to target long-run debt constraints. We identify the separate e?ects of the payment reductions and interest write-downs using both the experiment and cross-sectional variation in treatment intensity. We find that the interest write-downs significantly improved both financial and labor market outcomes, despite not taking effect for three to five years. In sharp contrast, there were no positive e?ects of the more immediate payment reductions. These results run counter to the widespread view that financial distress is largely the result of short-run constraints.
  • Topic: International Affairs
  • Political Geography: Global Focus
  • Author: Will Dobbie
  • Publication Date: 09-2019
  • Content Type: Working Paper
  • Institution: The John F. Kennedy School of Government at Harvard University
  • Abstract: We estimate the causal effects of parental incarceration on children’s short- and long-run outcomes using administrative data from Sweden. Our empirical strategy exploits exogenous variation in parental incarceration from the random assignment of criminal defendants to judges with different incarceration tendencies. We find that the incarceration of a parent in childhood leads to a significant increase in teen crime and significant decreases in educational attainment and adult employment. The effects are concentrated among children from the most disadvantaged families, where criminal convictions increase by 10 percentage points, high school graduation decreases by 25 percentage points, and employment at age 25 decreases by 29 percentage points. In contrast, there are no detectable effects among children from more advantaged families. These results suggest that the incarceration of parents with young children may significantly increase the intergenerational persistence of poverty and criminal behavior, even in affluent countries with extensive social safety nets.
  • Topic: International Political Economy, International Affairs, Prisons/Penal Systems
  • Political Geography: Global Focus
  • Author: Will Dobbie
  • Publication Date: 10-2019
  • Content Type: Working Paper
  • Institution: The John F. Kennedy School of Government at Harvard University
  • Abstract: This paper tests for bias in consumer lending using administrative data from a high-cost lender in the United Kingdom. We motivate our analysis using a new principal-agent model of bias, which predicts that profits should be higher for the most illiquid loan applicants at the margin if loan examiners are biased. We identify the profitability of marginal applicants using the quasi-random assignment of loan examiners. Consistent with our model, we find significant bias against immigrant and older applicants when using the firm’s preferred measure of long-run profits, but not when using the short-run measure used to evaluate examiner performance. Keywords: Discrimination, Consumer Credit
  • Topic: Debt, International Political Economy, International Affairs
  • Political Geography: Global Focus
  • Author: Todd Rogers
  • Publication Date: 09-2019
  • Content Type: Working Paper
  • Institution: The John F. Kennedy School of Government at Harvard University
  • Abstract: Many states mandate districts or schools notify parents when students have missed multiple unexcused days of school. We report a randomized experiment (N = 131,312) evaluating the impact of sending parents truancy notifications modified to target behavioral barriers that can hinder effective parental engagement. Modified truancy notifications that used simplified language, emphasized parental efficacy, and highlighted the negative incremental effects of missing school reduced absences by 0.07 days compared to the standard, legalistic, and punitively-worded notification—an estimated 40% improvement. This work illustrates how behavioral insights and randomized experiments can be used to improve administrative communications in education.
  • Topic: International Relations, International Affairs
  • Political Geography: Global Focus
  • Author: Ricardo Hausmann, Patricio Goldstein, Ana Grisanti, Tim O'Brien, Jorge Tapia, Miguel Ajgel Santos
  • Publication Date: 12-2019
  • Content Type: Working Paper
  • Institution: The John F. Kennedy School of Government at Harvard University
  • Abstract: Jordan faces a number of pressing economic challenges: low growth, high unemployment, rising debt levels, and continued vulnerability to regional shocks. After a decade of fast economic growth, the economy decelerated with the Global Financial Crisis of 2008-09. From then onwards, various external shocks have thrown its economy out of balance and prolonged the slowdown for over a decade now. Conflicts in neighboring countries have led to reduced demand from key export markets and cut off important trade routes. Foreign direct investment, which averaged 12.7% of gross domestic product (GDP) between 2003-2009, fell to 5.1% of GDP over the 2010-2017. Regional conflicts have interrupted the supply of gas from Egypt – forcing Jordan to import oil at a time of record prices, had a negative impact on tourism, and also provoked a massive influx of migrants and refugees. Failure to cope with 50.4% population growth between led to nine consecutive years (2008-2017) of negative growth rates in GDP per capita, resulting in a cumulative loss of 14.0% over the past decade (2009-2018). Debt to GDP ratios, which were at 55% by the end of 2009, have skyrocketed to 94%. Over the previous five years Jordan has undertaken a significant process of fiscal consolidation. The resulting reduction in fiscal impulse is among the largest registered in the aftermath of the Financial Crises, third only to Greece and Jamaica, and above Portugal and Spain. Higher taxes, lower subsidies, and sharp reductions in public investment have in turn furthered the recession. Within a context of lower aggregate demand, more consolidation is needed to bring debt-to-GDP ratios back to normal. The only way to break that vicious cycle and restart inclusive growth is by leveraging on foreign markets, developing new exports and attracting investments aimed at increasing competitiveness and strengthening the external sector. The theory of economic complexity provides a solid base to identify opportunities with high potential for export diversification. It allows to identify the existing set of knowhow, skills and capacities as signaled by the products and services that Jordan is able to make, and to define existing and latent areas of comparative advantage that can be developed by redeploying them. Service sectors have been growing in importance within the Jordanian economy and will surely play an important role in export diversification. In order to account for that, we have developed an adjusted framework that allows to identify the most attractive export sectors including services. Based on that adjusted framework, this report identifies export themes with a high potential to drive growth in Jordan while supporting increasing wage levels and delivering positive spillovers to the non-tradable economy. The general goal is to provide a roadmap with key elements of a strategy for Jordan to return to a high economic growth path that is consistent with its emerging comparative advantages.
  • Topic: Government, International Trade and Finance, Finance, Economy
  • Political Geography: Middle East, Jordan
  • Author: Arvind Subramanian, Josh Felman
  • Publication Date: 12-2019
  • Content Type: Working Paper
  • Institution: The John F. Kennedy School of Government at Harvard University
  • Abstract: We examine the pattern of growth in the 2010s. Standard explanations cannot account for the long slowdown, followed by a sharp collapse. Our explanation stresses both structural and cyclical factors, with finance as the distinctive, common element. In the immediate aftermath of the Global Financial Crisis (GFC), two key drivers of growth decelerated. Export growth slowed sharply as world trade stagnated, while investment fell victim to a homegrown Balance Sheet crisis, which came in two waves. The first wave—the Twin Balance Sheet crisis, encompassing banks and infrastructure companies—arrived when the infrastructure projects started during India’s investment boom of the mid-2000s began to go sour. The economy nonetheless continued to grow, despite temporary, adverse demonetization and GST shocks, propelled first by income gains from the large fall in international oil prices, then by government spending and a non-bank financial company (NBFC)-led credit boom. This credit boom financed unsustainable real estate inventory accumulation, inflating a bubble that finally burst in 2019. Consequently, consumption too has now sputtered, causing growth to collapse. As a result, India is now facing a Four Balance Sheet challenge—the original two sectors, plus NBFCs and real estate companies—and is trapped in an adverse interest-growth dynamic, in which risk aversion is leading to high interest rates, depressing growth, and generating more risk aversion. Standard remedies are unavailable: monetary policy is stymied by a broken transmission mechanism; large fiscal stimulus will only push up already-high interest rates, worsening the growth dynamic. The traditional structural reform agenda—land and labour market measures—are important for the medium run but will not address the current problems. Addressing the Four Balance Sheet problem decisively will be critical to durably reviving growth. Raising agricultural productivity is also high priority. And even before that, a Data Big Bang is needed to restore trust and enable better policy design.
  • Topic: International Trade and Finance, Economy, Global Political Economy, Economic growth, Global Financial Crisis
  • Political Geography: South Asia, India