40 Girum Abebe, Stefano Caria, and Esteban Ortiz-Ospina, “The Selection of Talent: Experimental and Structural Evidence from Ethiopia,” working paper, 2018.
41 Christopher Blattman and Stefan Dercon, “The Impacts of Industrial and Entrepreneurial Work on Income and Health: Experimental Evidence from Ethiopia,” American Economic Journal: Applied Economics 10, no. 3 (July 2018): 1–38.
42 Girum Abebe, Stefano Caria, Marcel Fafchamps, Paolo Falco, Simon Franklin, and Simon Quinn, “Anonymity or Distance? Job Search and Labour Market Exclusion in a Growing African City,” CSAE Working Paper WPS/2016-10-2, 2018.
43 Stefano Caria, “Choosing Connections. Experimental Evidence from a Link-Formation Experiment in Urban Ethiopia,” working paper, 2015; Pieter Serneels, “The Nature of Unemployment Among Young Men in Urban Ethiopia,” Review of Development Economics 11, no. 1 (2007): 170–86.
44 Carl Shapiro and Joseph E. Stiglitz, “Equilibrium Unemployment as a Worker Discipline Device,” American Economic Review 74, no. 3 (June 1984): 433–44.
45 Emily Breza, Supreet Kaur, and Yogita Shamdasani, “The Morale Effects of Pay Inequality,” Quarterly Journal of Economics 133, no. 2 (2018): 611–63.
46 Dustmann, Schönberg, and Stuhler, “Labor Supply Shocks, Native Wages, and the Adjustment of Local Employment.”
47 Patricia Cortés and Jessica Pan, “Foreign Nurse Importation and Native Nurse Displacement,” Journal of Health Economics 37 (2017): 164–80.
48 Kaivan Munshi, “Networks in the Modern Economy: Mexican Migrants in the U.S. Labor Market,” Quarterly Journal of Economics 118, no. 2 (2003): 549–99.
49 Lori Beaman, “Social Networks and the Dynamics of Labor Market Outcomes: Evidence from Refugees Resettled in the U.S.,” Review of Economic Studies 79, no. 1 (January 2012): 128–61.
50 George Akerlof, “The Market for ‘Lemons’: Quality Uncertainty and the Market Mechanism,” Quarterly Journal of Economics 84, no. 3 (1970): 488–500.
51 Referees and editors apparently found Akerlof’s paper difficult to understand. Essentially, the kind of circular reasoning that explains the unraveling requires a proper mathematical exposition to make sure it is watertight, and in 1970 this particular style of mathematical argumentation was unfamiliar to most economists. Therefore, it took some time before a journal ventured to publish it. But once published, it became an instant classic and has remained one of the most influential papers of all time. The kind of mathematics it used, which is an application of the branch of applied math called “game theory,” is now taught to economics undergraduates.
52 Banerjee, Enevoldsen, Pande, and Walton, “Information as an Incentive.”
53 World air quality report, AirVisual, 2018, accessed April 21, 2019, https://www.airvisual.com/world-most-polluted-cities.
54 Abhijit Banerjee and Esther Duflo, “The Economic Lives of the Poor,” Journal of Economic Perspectives 21, no. 1 (2007): 141–68.
55 Global Infrastructure Hub, Global Infrastructure Outlook, Oxford Economics, 2017.
56 Edward Glaeser, Triumph of the City: How Our Greatest Invention Makes Us Richer, Smarter, Greener, Healthier, and Happier (London: Macmillan, 2011).
57 Jan K. Brueckner, Shihe Fu Yizhen Gu, and Junfu Zhang, “Measuring the Stringency of Land Use Regulation: The Case of China’s Building Height Limits,” Review of Economics and Statistics 99, no. 4 (2017) 663–77.
58 Abhijit Banerjee and Esther Duflo, “Barefoot Hedge-Fund Managers,” Poor Economics (New York: PublicAffairs, 2011).
59 W. Arthur Lewis, “Economic Development with Unlimited Supplies of Labour,” Manchester School 22, no. 2 (1954): 139–91.
60 Robert Jensen and Nolan H. Miller, “Keepin’ ’Em Down on the Farm: Migration and Strategic Investment in Children’s Schooling,” NBER Working Paper 23122, 2017.
61 Robert Jensen, “Do Labor Market Opportunities Affect Young Women’s Work and Family Decisions? Experimental Evidence from India,” Quarterly Journal of Economics 127, no. 2 (2012): 753–92.
62 Bryan, Chowdhury, and Mobarak, “Underinvestment in a Profitable Technology.”
63 Maheshwor Shrestha, “Get Rich or Die Tryin’: Perceived Earnings, Perceived Mortality Rate, and the Value of a Statistical Life of Potential Work-Migrants from Nepal,” World Bank Policy Research Working Paper 7945, 2017.
64 Maheshwor Shrestha, “Death Scares: How Potential Work-Migrants Infer Mortality Rates from Migrant Deaths,” World Bank Policy Research Working Paper 7946, 2017.
65 Donald Rumsfeld, Known and Unknown: A Memoir (New York: Sentinel, 2012).
66 Frank H. Knight, Risk, Uncertainty, and Profit (Boston: Hart, Schaffner, and Marx, 1921).
67 Justin Sydnor, “(Over)insuring Modest Risks,” American Economic Journal: Applied Economics 2, no. 4 (2010): 177–99.
68 We will return to the idea of these motivated beliefs in chapter 4. For a reference, see Roland Bénabou and Jean Tirole, “Mindful Economics: The Production, Consumption, and Value of Beliefs,” Journal of Economic Perspectives 30, no. 3 (2016): 141–64.
69 Alexis de Tocqueville, Democracy in America (London: Saunders and Otley, 1835).
70 Alberto Alesina, Stefanie Stantcheva, and Edoardo Teso, “Intergenerational Mobility and Preferences for Redistribution,” American Economic Review 108, no. 2 (2018): 521–54, DOI: 10.1257/aer.20162015.
71 Benjamin Austin, Edward Glaeser, and Lawrence H. Summers, “Saving the Heartland: Place-Based Policies in 21st Century America,” Brookings Papers on Economic Activity Conference Drafts, 2018.
72 Peter Ganong and Daniel Shoag, “Why Has Regional Income Convergence in the U.S. Declined?,” Journal of Urban Economics 102 (2017): 76–90.
73 Enrico Moretti, The New Geography of Jobs (Boston: Houghton Mifflin Harcourt, 2012).
74 Ganong and Shoag, “Why Has Regional Income Convergence in the U.S. Declined?”
75 “Starbucks,” Indeed.com, accessed April 21, 2019, https://www.indeed.com/q-Starbucks-l-Boston,-MA-jobs.html; “Starbucks,” Indeed.com, accessed April 21, 2019, https://www.indeed.com/jobs?q=Starbucks&l=Boise percent2C+ID.
76 This example is worked out by Ganong and Shoag in Peter Ganong and Daniel Shoag, “Why Has Regional Income Convergence in the U.S. Declined?”
77 “The San Francisco Rent Explosion: Part II,” Priceonomics, accessed June 4, 2019, https://priceonomics.com/the-san-francisco-rent-explosion-part-ii/.
78 According to RentCafé, the average rent in Mission Dolores is $3,728 for 792 square feet. “San Francisco, CA Rental Market Trends,” accessed June 4, 2019, https://www.rentcafe.com/average-rent-market-trends/us/ca/san-francisco/.
79 “New Money Driving Out Working-Class San Franciscans,” Los Angeles Times, June 21, 1999, accessed June 4, 2019, https://www.latimes.com/archives/la-xpm-1999-jun-21-mn-48707-story.html.
80 Glaeser, Triumph of the City.
81 Atif Mian and Amir Sufi have developed these arguments in their book House of Debt: How They (and You) Caused the Great Recession, and How We Can Prevent It from Happening Again (Chicago: University of Chicago Press, 2014), and many articles, including Atif Mian, Kamalesh Rao, and Amir Sufi, “Household Balance Sheets, Consumption, and the Economic Slump,” Quarterly Journal of Economics 128, no. 4 (2013): 1687–1726.
82 Matthew Desmond, Evicted: Poverty and Profit in the American City (New York: Crown, 2016).
83 Mark Aguiar, Mark Bils, Kerwin Kofi Charles, and Erik Hurst, “Leisure Luxuries and the Labor Supply of Young Men,” NBER Working Paper 23552, 2017.
84 Kevin Roose, “Silicon Valley Is Over, Says Silicon Valley,” New York Times, March 4, 2018.
85 Andrew Ross Sorkin, “From Bezos to Walton, Big Investors Back Fund for ‘Flyover’ Start-Ups,” New York Times, December 4, 2017.
86 Glenn Ellison and Edward Glaeser, “Geographic Concentration in U.S. Manufacturing Industries: A Dartboard Approach,” Journal of Political Economy 105, no. 5 (1997): 889–927.
87 Bryan, Chowdhury, and Mobarak, “Underinvestment
in a Profitable Technology.”
88 Tabellini, “Gifts of the Immigrants, Woes of the Natives.”
CHAPTER 3. THE PAINS FROM TRADE
1 “Steel and Aluminum Tariffs,” Chicago Booth, IGM Forum, 2018, http://www.igmchicago.org/surveys/steel-and-aluminum-tariffs.
2 “Import Duties,” Chicago Booth, IGM Forum, 2016, http://www.igm chicago.org/surveys/import-duties.
3 Abhijit Banerjee, Esther Duflo, and Stefanie Stantcheva, “Me and Everyone Else: Do People Think Like Economists?,” MIMEO, Massachusetts Institute of Technology, 2019.
4 Ibid.
5 The Collected Scientific Papers of Paul A. Samuelson, vol. 3 (Cambridge, MA: MIT Press, 1966), 683.
6 Ibid.
7 David Ricardo, On the Principles of Political Economy and Taxation (London: John Murray, 1817).
8 Paul A. Samuelson and William F. Stolper, “Protection and Real Wages,” Review of Economic Studies 9, no. 1 (1941), 58–73.
9 P. A. Samuelson, “The Gains from International Trade Once Again,” Economic Journal 72, no. 288 (1962): 820–29, DOI: 10.2307/2228353.
10 John Keats, “Ode on a Grecian Urn,” in The Complete Poems of John Keats, 3rd ed. (New York: Penguin Classics, 1977).
11 Petia Topalova, “Factor Immobility and Regional Impacts of Trade Liberalization: Evidence on Poverty from India,” American Economic Journal: Applied Economics 2, no. 4 (2010): 1–41, DOI: 10.1257/app.2.4.1.
12 “GDP Growth (annual %),” World Bank, accessed March 29, 2019, https://data.worldbank.org/indicator/ny.gdp.mktp.kd.zg?end=2017&start=1988.
13 Of course, the trade optimists, among them Jagdish Bhagwati, T. N. Srinivasan, and their followers make the argument that pre-1991 growth was about to grind to a halt and the bailout and trade liberalization saved it.
14 Tractatus 7, in Ludwig von Wittgenstein, Tractatus Logico-Philosophicus, originally published by Annalen der Naturphilosophie, 1921. Published in the original edition by Chiron Academic Press in 2017, with an introduction by Bertrand Russell.
15 “GDP Growth (annual %),” World Bank.
16 The share of GDP for the top 1 percent (in terms of income) rose from a low of 6.1 percent in 1982 to 21.3 percent in 2015. World Inequality Database, accessed March 15, 2019, https://wid.world/country/india.
17 Diego Cerdeiro and Andras Komaromi, approved by Valerie Cerra, “The Effect of Trade on Income and Inequality: A Cross-Sectional Approach,” International Monetary Fund Background Papers, 2017.
18 Pinelopi Koujianou Goldberg and Nina Pavcnik, “Distributional Effects of Globalization in Developing Countries,” Journal of Economic Literature 45, no. 1 (March 2007): 39–82.
19 Thomas Piketty, Li Yang, and Gabriel Zucman, “Capital Accumulation, Private Property and Rising Inequality in China, 1978–2015,” American Economic Review, forthcoming in 2019, working paper version accessed on June 19, 2019, http://gabriel-zucman.eu/files/PYZ2017.pdf.
20 Topalova, “Factor Immobility and Regional Impacts of Trade Liberalization.”
21 Gaurav Datt, Martin Ravallion, and Rinku Murgai, “Poverty Reduction in India: Revisiting Past Debates with 60 Years of Data,” VOX CEPR Policy Portal, accessed March 15, 2019, voxeu.org.
22 Eric V. Edmonds, Nina Pavcnik, and Petia Topalova, “Trade Adjustment and Human Capital Investments: Evidence from Indian Tariff Reform,” American Economic Journal: Applied Economics 2, no. 4 (2010): 42–75. DOI: 10.1257/app.2.4.42.
23 Orazio Attanasio, Pinelopi K. Goldberg, and Nina Pavcnik, “Trade Reforms and Trade Inequality in Colombia,” Journal of Development Economics 74, no. 2 (2004): 331–66; Brian K. Kovak, “Regional Effects of Trade Reform: What Is the Correct Level of Liberalization?” American Economic Review 103, no. 5 (2013): 1960–76.
24 Pinelopi K. Goldberg, Amit Khandelwal, Nina Pavcnik, and Petia Topalova, “Trade Liberalization and New Imported Inputs,” American Economic Review 99, no. 2 (2009): 494–500.
25 Abhijit Vinayak Banerjee, “Globalization and All That,” in Understanding Poverty, ed. Abhijit Vinayak Banerjee, Roland Bénabou, and Dilip Mookherjee (New York: Oxford University Press, 2006).
26 Topalova, “Factor Immobility and Regional Impacts of Trade Liberalization.”
27 Abhijit Banerjee and Esther Duflo, “Growth Theory Through the Lens of Development Economics,” ch. 7, in The Handbook of Economic Growth, eds. Philippe Aghion and Stephen Durlauf (Amsterdam: North Holland, 2005), vol. 1, part A: 473–552.
28 Topalova, “Factor Immobility and Regional Impacts of Trade Liberalization.”
29 Pinelopi K. Goldberg, Amit K. Khandelwal, Nina Pavcnik, and Petia Topalova, “Multiproduct Firms and Product Turnover in the Developing World: Evidence from India,” Review of Economics and Statistics 92, no. 4 (2010): 1042–49.
30 Robert Grundke and Cristoph Moser, “Hidden Protectionism? Evidence from Non-Tariff Barriers to Trade in the United States,” Journal of International Economics 117 (2019): 143–57.
31 World Trade Organization, “Members Reaffirm Commitment to Aid for Trade and to Development Support,” 2017, accessed March 18, 2019, https://www.wto.org/english/news_e/news17_e/gr17_13jul17_e.htm.
32 David Atkin, Amit K. Khandelwal, and Adam Osman, “Exporting and Firm Performance: Evidence from a Randomized Experiment,” Quarterly Journal of Economics 132, no. 2 (2017): 551–615.
33 “Rankings by Country of Average Monthly Net Salary (After Tax) (Salaries and Financing),” Numbeo, accessed March 18, 2019, https://www.numbeo.com/cost-of-living/country_price_rankings?itemId=105.
34 Abhijit V. Banerjee and Esther Duflo, “Reputation Effects and the Limits of Contracting: A Study of the Indian Software Industry,” Quarterly Journal of Economics 115, no. 3 (2000): 989–1017.
35 Amos Tversky and Daniel Kahneman, “The Framing of Decisions and Psychology of Choice,” Science 211 (1981): 453–58.
36 Jean Tirole, “A Theory of Collective Reputations (with Applications to the Persistence of Corruption and to Firm Quality),” Review of Economic Studies 63, no. 1 (1996): 1–22.
37 Rocco Machiavello and Ameet Morjaria, “The Value of Relationships: Evidence from Supply Shock to Kenyan Rose Exports,” American Economic Review 105, no. 9 (2015): 2911–45.
38 Wang Xiaodong, “Govt Issues Guidance for Quality of Products,” China Daily, updated September 14, 2017, accessed March 29, 2019, http://www.chinadaily.com.cn/china/2017-09/14/content_31975019.htm.
39 Gujanita Kalita, “The Emergence of Tirupur as the Export Hub of Knitted Garments in India: A Case Study,” ICRIER, accessed April 21, 2019, https://www.econ-jobs.com/research/52329-The-Emergence-of-Tirupur-as-the-Export-Hub-of-Knitted-Garments-in-India-A-Case-Study.pdf.
40 L. N. Revathy, “GST, Export Slump Have Tirupur’s Garment Units Hanging by a Thread,” accessed April 21, 2019, https://www.thehindubusiness line.com/economy/gst-export-slump-have-tirupurs-garment-units-hanging-by-a-thread/article9968689.ece.
41 “Clusters 101,” Cluster Mapping, accessed March 18, 2019, http://www.clustermapping.us/content/clusters-101.
42 Antonio Gramsci, “‘Wave of Materialism’ and ‘Crisis of Authority,’” in Selections from the Prison Notebooks (New York: International Publishers, 1971), 275–76; Prison Notebooks, vol. 2, notebook 3, 1930, 2011 edition, SS-34, Past and Present 32–33.
43 According to the World Bank, India’s openness ratio was 42 percent in 2015, compared to 28 percent in the United States and 39 percent in China. “Trade Openness—Country Rankings,” TheGlobalEconomy.com., accessed March 8, 2019, https://www.theglobaleconomy.com/rankings/trade_open ness/.
44 Pinelopi K. Goldberg, Amit K. Khandelwal, Nina Pavcnik, and Petia Topalova, “Imported Intermediate Inputs and Domestic Product Growth: Evidence from India,” Quarterly Journal of Economics 125, no. 4 (2010): 1727–67.
45 Paul Krugman, “Taking on China,” New York Times, September 30, 2010.
46 J. D. Vance, Hillbilly Elegy: A Memoir of a Family and Culture in Crisis (New York: Harper, 2016).
47 David Au
tor, David Dorn, and Gordon Hanson, “The China Syndrome: Local Labor Market Effects of Import Competition in the United States,” American Economic Review 103, no. 6 (2013): 2121–68; David Autor, David Dorn, and Gordon Hanson, “The China Shock: Learning from Labor-Market Adjustment to Large Changes in Trade,” Annual Review of Economics 8 (2016): 205–40.
48 Ragnhild Balsvik, Sissel Jensen, and Kjell G. Salvanes, “Made in China, Sold in Norway: Local Labor Market Effects of an Import Shock,” Journal of Public Economics 127 (2015): 137–44; Wolfgang Dauth, Sebastian Findeisen, and Jens Suedekum, “The Rise of the East and the Far East: German Labor Markets and Trade Integration,” Journal of the European Economic Association 12, no. 6 (2014): 1643–75; Vicente Donoso, Víctor Martín, and Asier Minondo, “Do Differences in the Exposure to Chinese Imports Lead to Differences in Local Labour Market Outcomes? An Analysis for Spanish Provinces,” Regional Studies 49, no. 10 (2015): 1746–64.
49 M. Allirajan, “Garment Exports Dive 41 Percent in October on GST Woes,” Times of India, November 16, 2017, https://timesofindia.indiatimes.com/business/india-business/garment-exports-dive-41-in-october-on-gst-woes/articleshow/61666363.cms.
50 Atif Mian, Kamalesh Rao, and Amir Sufi, “Housing Balance Sheets, Consumption, and the Economic Slump,” Quarterly Journal of Economics 128, no. 4 (2013): 1687–1726.
51 The story is reported in an article from the Atlantic magazine. Alana Semuels, “Ghost Towns of the 21st Century,” Atlantic, October 20, 2015.
52 Autor, Dorn, and Hanson, “The China Syndrome.”
53 David H. Autor, Mark Duggan, Kyle Greenberg, and David S. Lyle, “The Impact of Disability Benefits on Labor Supply: Evidence from the VA’s Disability Compensation Program,” American Economic Journal: Applied Economics 8, no. 3 (2016): 31–68.
54 David H. Autor, “The Unsustainable Rise of the Disability Rolls in the United States: Causes, Consequences, and Policy Options,” in Social Policies in an Age of Austerity, eds. John Karl Scholz, Hyunpyo Moon, and Sang-Hyop Lee (Northampton, MA: Edward Elgar, 2015) 107–36.
55 Aparna Soni, Marguerite E. Burns, Laura Dague, and Kosali I. Simon, “Medicaid Expansion and State Trends in Supplemental Security Income Program Participation,” Health Affairs 36, no. 8 (2017): 1485–88.
Good Economics for Hard Times Page 41