infonet-economy

We explore empirically how capital inflows into the US and financial deregulation within the United States interacted in driving the run-up (and subsequent decline) in US housing prices over the period 1990-2010. To obtain an ex ante measure of financial liberalization, we focus on the history of interstate-banking deregulation during the 1980s, i.e. prior to the large net capital inflows into the US from China and other emerging economies. Our re- sults suggest a long shadow of deregulation: in states that opened their banking markets to out-of-state banks earlier, house prices were more sensitive to capital inflows. We provide evidence that global imbalances were a major positive funding shock for US wide banks: different from local banks, these banks held a geographically diversified portfolio of mort- gages which allowed them to tap the global demand for safe assets by issuing private-label safe assets backed by the country-wide US housing market. This, in turn, allowed them to expand mortgage lending and lower interest rates, driving up housing prices.

Authors' names are deliberately alphabetical. The authors are grateful to Michele Bernasconi, Monika Bütler, Alain Cohn, Simon Evenett, Ernst Fehr, Simon Gächter, Jens Grosser, Sally Gschwend, John Hey, Martin Leroch, Hervè Moulin, Ryan McKay, Clemens Puppe, Rupert Sausgruber, Robert Sugden, Christian Thöni, Jean-Robert Tyran, Roberto Weber, as well as the audiences at the NYU Experimental Political Science Conference 2010, ASSET Meeting 2009, ESA European Regional Meeting 2008/2009, APET Conference 2009, EPCS Conference 2008, Bocconi University, Florida State University, IMT - Lucca, University of Messina, Universitat Jaume I of Castellòn, and University of Zürich for very helpful discussions and comments. The data used in this study are stored on the AJPS Data Archive on Dataverse.

Despite that a wealth of evidence links striatal dopamine to individualś reward learning performance in non-social environments, the neurochemical underpinnings of such learning during social interaction are unknown. Here, we show that the administration of 300 mg of the dopamine precursor L-DOPA to 200 healthy male subjects influences learning about a partners’ prosocial preferences in a novel social interaction task, which is akin to a repeated trust game. We found learning to be modulated by a well-established genetic marker of striatal dopamine levels, the 40-bp variable number tandem repeats polymorphism of the dopamine transporter (DAT1 polymorphism). In particular, we found that L-DOPA improves learning in 10/10R genoype subjects, who are assumed to have lower endogenous striatal dopamine levels and impairs learning in 9/10R genotype subjects, who are assumed to have higher endogenous dopamine levels. These findings provide first evidence for a critical role of dopamine in learning whether an interaction partner has a prosocial or a selfish personality. The applied pharmacogenetic approach may open doors to new ways of studying psychiatric disorders such as psychosis, which is characterized by distorted perceptions of others’ prosocial attitudes.

We juxtapose the effects of trade and technology on employment in U.S. local labor markets between 1990 and 2007. Labor markets whose initial industry composition exposes them to rising Chinese import competition experience significant falls in employment, particularly in manufacturing and among non-college workers. Labor markets susceptible to computerization due to specialization in routine task-intensive activities experience significant occupational polarization within manufacturing and nonmanufacturing but no net employment decline. Trade impacts rise in the 2000s as imports accelerate, while the effect of technology appears to shift from automation of production activities in manufacturing towards computerization of information-processing tasks in non manufacturing.

This paper summarizes and discusses some recent experimental results on cost-reducing investments. I focus on the relation between competition and investments and on increasing dominance.

We analyze the effect of rising Chinese import competition between 1990 and 2007 on US local labor markets, exploiting cross- market variation in import exposure stemming from initial differences in industry specialization and instrumenting for US imports using changes in Chinese imports by other high-income countries. Rising imports cause higher unemployment, lower labor force participation, and reduced wages in local labor markets that house import-competing manufacturing industries. In our main specification, import competition explains one-quarter of the contemporaneous aggregate decline in US manufacturing employment. Transfer benefits payments for unemployment, disability, retirement, and healthcare also rise sharply in more trade-exposed labor markets.

This paper explores the geographic overlap of trade and technology shocks across local labor markets in the United States. Regional exposure to technological change, as measured by specialization in routine task-intensive production and clerical occupations, is largely uncorrelated with regional exposure to trade competition from China. While the impacts of technology are dispersed throughout the United States, the impacts of trade tend to be more geographically concentrated, owing in part to the spatial agglomeration of labor-intensive manufacturing. Our findings highlight the feasibility of separately identifying the impacts of recent changes in trade and technology on US regional economies.

We offer a unified analysis of the growth of low-skill service occupations between 1980 and 2005 and the concurrent polarization of US employment and wages. We hypothesize that polarization stems from the interaction between consumer preferences, which favor variety over specialization, and the falling cost of automating routine, codifiable job tasks. Applying a spatial equilibrium model, we corroborate four implications of this hypothesis. Local labor markets that specialized in routine tasks differentially adopted information technology, reallocated low-skill labor into service occupations (employment polarization), experienced earnings growth at the tails of the distribution (wage polarization), and received inflows of skilled labor.

Die geplante Liberalisierung des chinesischen Kapitalmarktes eröffnet Chancen und birgt auch Risiken. Ein Kommentar von Fabrizio Zilibotti.