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.
Starting from the stylized fact that the Swiss franc is a safe haven currency, this paper focuses on the determinants of the Swiss franc during the lower bound regime from September 2011 to January 2015. We describe the Swiss franc as a function of global market risk fundamentals and find that the macroeconomic model outlined by Krugman (1991) describes the EUR/CHF exchange rate well during this particular time. We show that, as predicted by Krugman’s model, the sole expectation that the Swiss National Bank would prevent the Swiss franc from appreciating beyond 1.20 to the euro muted the sensitivity of EUR/CHF to global market risk. An important assumption for the model prediction to hold is that the central bank’s commitment to the exchange rate target is credible. We thus use EUR/CHF option prices together with the global market risk fundamental to assess the credibility of the lower bound. We find that the only true credibility issue was in November 2014. After November 2014 the Swiss National Bank could convince markets anew from its target-zone policy and suspend the lower bound unexpectedly a few weeks later.
It is important for animals to estimate the value of rewards as accurately as possible. Because the number of potential reward values is very large, it is necessary that the brain's limited resources be allocated so as to discriminate better among more likely reward outcomes at the expense of less likely outcomes. We found that midbrain dopamine neurons rapidly adapted to the information provided by reward-predicting stimuli. Responses shifted relative to the expected reward value, and the gain adjusted to the variance of reward value. In this way, dopamine neurons maintained their reward sensitivity over a large range of reward values.
A predominant theory regarding early stroke and its effect on language development, is that early left hemisphere lesions trigger compensatory processes that allow the right hemisphere to assume dominant language functions, and this is thought to underlie the near normal language development observed after early stroke. To test this theory, we used functional magnetic resonance imaging to examine brain activity during category fluency in participants who had sustained pre- or perinatal left hemisphere stroke (n = 25) and in neurologically normal siblings (n = 27). In typically developing children, performance of a category fluency task elicits strong involvement of left frontal and lateral temporal regions and a lesser involvement of right hemisphere structures. In our cohort of atypically developing participants with early stroke, expressive and receptive language skills correlated with activity in the same left inferior frontal regions that support language processing in neurologically normal children. This was true independent of either the amount of brain injury or the extent that the injury was located in classical cortical language processing areas. Participants with bilateral activation in left and right superior temporal-inferior parietal regions had better language function than those with either predominantly left- or right-sided unilateral activation. The advantage conferred by left inferior frontal and bilateral temporal involvement demonstrated in our study supports a strong predisposition for typical neural language organization, despite an intervening injury, and argues against models suggesting that the right hemisphere fully accommodates language function following early injury.
Transcranial direct current stimulation (tDCS) is a noninvasive brain stimulation technique that alters cortical excitability and activity in a polarity-dependent way. Stimulation for few minutes has been shown to induce plastic alterations of cortical excitability and to improve cognitive performance. These effects might be caused by stimulation-induced alterations of functional cortical network connectivity. We aimed to investigate the impact of tDCS on cortical network function through functional connectivity and graph theoretical analysis. Single recordings in healthy volunteers with 62 electroencephalography channels were acquired before and after 10 min of facilitatory anodal tDCS over the primary motor cortex (M1), combined with inhibitory cathodal tDCS of the contralateral frontopolar cortex, in resting state and during voluntary hand movements. Correlation matrices containing all 62 pairwise electrode combinations were calculated with the synchronization likelihood (SL) method and thresholded to construct undirected graphs for the θ, α, β, low-γ and high-γ frequency bands. SL matrices and undirected graphs were compared before and after tDCS. Functional connectivity patterns significantly increased within premotor, motor, and sensorimotor areas of the stimulated hemisphere during motor activity in the 60-90 Hz frequency range. Additionally, tDCS-induced significant intrahemispheric and interhemispheric connectivity changes in all the studied frequency bands. In summary, we show for the first time evidence for tDCS-induced changes in brain synchronization and topological functional organization.
