Friday, March 27, 2009

Krugman on financial risk-taking

Today Paul Krugman points out a subtle point regarding improvements in financial markets' ability to diversify risk, through things like credit default swaps, etc. While hedging is often touting as spreading risk more evenly and reducing exposure, in fact it can also induce behavioral change. Namely toward more financial risk-taking, which may appear to be cheaper.

It's not clear to me that high-flying finance is anywhere near a thing of the past, as I think his column suggests. But I would agree that the events of the past several years certainly call for a reassessment of how we measure and manage risk.

Thursday, March 26, 2009

Proximity to fast food and obesity

Today's Times reported on a new NBER working paper that finds increased obesity caused by the presence of fast food restaurants.

Currie et al. focus on 9th graders and moms, and what's great is that the effects of geographic proximity are indeed estimated stronger for 9th graders than for moms. You'd think that having fast food within your zip code, as opposed to just a little further away, might not matter a lot for folks with cars, and apparently that's somewhat true.

But if you're walking to the fast food restaurant, aren't you reversing some of the obesity effects? The issue is what's the treatment and control; if there are fewer fast food joints around, presumably those who would be walking to them would instead be walking to obtain healthier food alternatives in the counterfactual. But I wonder where 9th graders would otherwise be going than to fast food. Their counterfactual may be eating lunch at school, but then again, maybe 9th graders aren't allowed off campus and what we're really talking about is after-school eating and possibly dinners.

Looking at the study, you might also raise your eyebrows at the definition of what's fast food and why that matters. Are meals really healthier at IHOP and Applebee's than at McDonald's? But the story is more about calories per dollar, which is far higher at McDonald's.

Wednesday, March 25, 2009

Philanthropic giving, age, and immigration

Today's New York Times reports CUNY reached $1.2 billion in fund-raising three years ahead of schedule, which is described as a remarkable accomplishment for a "public system that historically attracted immigrants and working-class students."

One recent paper on the charitable giving of immigrants confirms that immigrant status tends to be associated with lower probabilities and levels of giving, but that once you control for wealth and other characteristics, the effect basically vanishes.

Although City University is a relatively old institution, parts of it are quite young. Queens College dates from 1937, while City, Hunter, Baruch, and Brooklyn are older. With considerable growth in the system after World War II, is it a surprise that charitable donations might not have picked up steam until a point where graduates were old enough to afford it?

Sunday, March 8, 2009

Employer-sponsored default saving plans

Several days ago the Times ran an article about plans for universal tax-free savings accounts as mentioned by President Obama in February. It highlights the importance of having the default choice be to set up a savings account, which is a lesson from behavioral finance.

For those of us who switch employment frequently, however, it's a huge pain to keep track of all these accounts. Sometimes it's next to impossible to convince investment management companies even to give you access to your account in order to consolidate them. The article discusses that problem as well, and it's hard to know what a reasonable solution might be.

Sunday, March 1, 2009

Neat graphic on the sex gap in wages

Today a graphic in the Times plots weekly median wages for men and women by occupation. It reveals broad but also heterogeneous inequality in earnings.

Professors and postsecondary teachers, my group, is at male weekly earnings = $1,250 and female weekly earnings = a little less than $1,000. There is vast heterogeneity within that occupational group, which includes tenured, tenure-track, and adjunct professors, stepping from highest rank to lowest. Rank and earnings are correlated, as are rank and sex and probably rank and job flexibility.

A graphic like this is interesting, but it is hard to know the takeaway message other than the fact that wage inequality is broad-based across occupations or industries.

France did that too, and we laughed

Today's Times has an article about reductions in the workweek, and in work intensity more generally, that may be a result of the downturn. An interesting nugget is that Kellogg reduced weekly hours to 30 during the Great Depression.

Among those still employed, work intensity typically falls anyway during recessions. It's surely one of the reasons why population health temporarily improves during economic bad times. I think much of the reduction in hours probably occurs among salaried workers and people who usually work overtime. Mandating a reduced workweek, as apparently Kellogg did, is the kind of thing that the entire OECD chastised France for doing back in the late 1990s.