6106 Rockefeller Center
Hanover, NH 03755-3514
I am a Professor and Vice Chair of the Economics Department at Dartmouth College.
Curriculum Vitae (pdf )
Trade and Income -- Exploiting Time Series in Geography, AEJ: Applied, October 2019, lead article
Establishing a robust causal relationship between trade and income has been difficult. Frankel and Romer (1999) use geographic instruments to identify the causal effects of trade. Rodriguez and Rodrik (2000) show that these results are not robust to controlling for missing variables such as distance to the equator or institutions. This paper solves the omitted variable problem by generating a time varying geographic instrument. Improvements in aircraft technology have caused the quantity of world trade carried by air to increase over time. Country pairs with relatively short air routes compared to sea routes benefit more from this change in technology. This heterogeneity can be used to generate a geography based instrument for trade that varies over time. The time series variation allows for controls for country fixed effects, eliminating the bias from time invariant variables such as distance from the equator or historically determined institutions. Trade has a significant effect on income with an elasticity of roughly one half. Differences in predicted trade growth can explain roughly 17 percent of the variation in cross country income growth between 1960 and 1995. Distance Data
Geographic Dispersion of Economic Shocks: Evidence from the Fracking Revolution, with Erin Mansur and Bruce Sacerdote, American Economic Review, April 2017, 107(4).
We track the geographic and temporal propagation of local economic shocks from new oil and gas production generated by hydrofracturing. Each million dollars of new production produces $80,000 in wage income and $132,000 in royalty and business income within a county. Within 100 miles, one million dollars of new production generates $257,000 in wages and $286,000 in royalty and business income. Roughly two-thirds of the wage income increase persists for two years. Assuming no general equilibrium effects, new extraction increased aggregate US employment by as many as 640,000, and decreased the unemployment rate by 0.43 during the Great Recession.
Undergraduate Research in the Dartmouth Economics Department, Journal of Economic Education, Fall 2017, 48(4).
One of the key components to the undergraduate research enterprise at Dartmouth is the recognition that learning to do research requires both directed instruction and learning by doing. The economics faculty have tailored a fruitful undergraduate research program based on this philosophy, and this article describes these efforts while also offering advice to other programs as they strive to involve undergraduates in research.
The negative effect of distance on bilateral trade is one of the most robust findings in international trade. However, the underlying causes of this negative relationship are less well understood. This paper exploits a temporary shock to distance, the closing of the Suez canal in 1967 and its reopening in 1975, to examine the effect of distance on trade and the effect of trade on income. Time series variation in sea distance allows for the inclusion of pair effects which account for static differences in tastes and culture between countries. The distance effects estimated in this paper are therefore more clearly about transportation costs in the trade of goods than typical gravity model estimates. Distance is found to have a significant impact on trade with an elasticity that is about half as large as estimates from typical cross sectional estimates. Since the shock to trade is exogenous for most countries, predicted trade volume from the shock can be used to identify the effect of trade on income. Trade is found to have a significant impact on income. The time series dimension allows for country fixed effects which control for all long run income differences. Because identification is through changes in sea distance, the effect is coming entirely through trade in goods and not through alternative channels such as technology transfer, tourism, or foreign direct investment.
The Cognitive Eﬀects of Micronutrient Deﬁciency: Evidence from Salt Iodization in the United States with Dimitra Politi and David Weil, Journal of the European Economic Association, April 2017
Iodine deﬁciency is the leading cause of
preventable mental retardation in the world today. Iodine deﬁciency was
common in the developed world until the introduction of iodized salt in the
1920’s. The incidence of iodine deﬁciency is connected to low iodine
levels in the soil and water. We examine the impact of salt iodization in the
On the long-run effects of colonial legacies. Evidence from small islands, with Bruce Sacerdote, book chapter, The Long Economic and Political Shadow of History, Volume 1, CEPR Press, Stelios Michalopoulos & Elias Papaioannou eds, January 2017.
How Much Would US Style Fiscal Integration Buffer European Unemployment and Income Shocks?, with Bruce Sacerdote, American Economic Review: Papers & Proceedings, May 2013.
We examine the degree to which federal fiscal integration smoothes income and unemployment shocks across US States. We find that roughly 25 cents of every dollar of income shock at the state level is offset by federal fiscal policy. This stabilization comes entirely through the Federal tax system, not through spending stabilizers, automatic or otherwise. If we apply a comparable amount of cross country stabilization to European Union countries (as exists across US States), Greece and Spain would be receiving additional transfers of 2.5 percent of GDP.
Global Savings and Global Investment:The Transmission of Identified Fiscal Shocks with Jay Shambaugh, AEJ: Economic Policy, May 2012
This paper examines the effect of exogenous shocks to savings on world capital markets. Using the exogenous shocks to US tax policy identified by Romer & Romer, we trace the impact of an exogenous shock to savings through the income accounting identities of the US and the rest of the world. We find that exogenous tax increases are only partially offset by changes in private savings (Ricardian equivalence is not complete). We also find that only a small amount of the resulting change in US saving is absorbed by increased domestic investment (contrary to Feldstein & Horioka). Almost half of the fiscal shock is transmitted abroad as an increase in the US current account. Positive shocks to US savings generate current account deficits and increases in investment in other countries in the world. We cannot reject that the shock is uniformly transmitted across countries with different currency regimes and different levels of development. The results suggest highly integrated world capital markets with rapid adjustment. In short we find that the US acts like a large open economy and the world acts like a closed economy.
The US Productivity Slowdown, the Baby Boom, and Management Quality, Journal of Population Economics, January 2011
This paper examines whether management changes caused
by the entry of the baby boom into the workforce explain the
Did the stimulus stimulate? Real time estimates of the effects of the American Recovery and Reinvestment Act, with Bruce Sacerdote, NBER Working Paper 16759
We use state and county level variation to examine the impact of the American Recovery and Reinvestment Act on employment. A cross state analysis suggests that one additional job was created by each $170,000 in stimulus spending. Time series analysis at the state level suggests a smaller response with a per job cost of about $400,000. These results imply Keynesian multipliers between 0.5 and 1.0, somewhat lower than those assumed by the administration. However, the overall results mask considerable variation for different types of spending. Grants to states for education do not appear to have created any additional jobs. Support programs for low income households and infrastructure spending are found to be highly expansionary. Estimates excluding education spending suggest fiscal policy multipliers of about 2.0 with per job cost of under $100,000.
Colonialism and Modern Income -- Islands as Natural Experiments, with Bruce Sacerdote, Review of Economics and Statistics, May 2009
Using a new database of islands throughout the
Atlantic, Pacific and
"Convergence By Parts," B.E. Journal of Macroeconomics, July 2008
This paper investigates Danny Quah's finding that the cross country distribution of per capita income is moving toward a twin peaked distribution; that is, a state with a group of countries with low incomes, a group of countries with high incomes and few countries in between. This finding has supported and encouraged a large theoretical literature on development traps which produce twin peaks through physical and human capital accumulation. Contrary to these models, I find that physical and human capital are moving towards single peaked distributions. The distribution of physical capital shows clear movement toward the OECD level of the capital output ratio. The productivity residual is moving toward a twin peaked distribution which mirrors that of per capita income. I therefore conclud that Quah's result is driven by productivity differences rather than factor accumulation. This result mirrors recent work by Klenow & Rodriguez-Clare (1997) and Hall & Jones (1999) which emphasize the importance of productivity differences. A further examination uncovers dynamic externalities from factor accumulation and openness to productivity. Low levels of human capital and lack of openness to trade are potential causes of the lower peak in productivity.
Will The Stork Return to Europe and Japan? Understanding Fertility within Developed Nations, with Bruce Sacerdote and Ariel Stern, Journal of Economic Perspectives, Summer 2008
Only a few rich nations are currently at
replacement levels of fertility and many are considerably below. We believe that changes in the status of
women are driving fertility change. At
low levels of female status, women specialize in household production and
fertility is high. In an intermediate
phase, women have increasing opportunities to earn a living outside the home
yet still shoulder the bulk of household production. Fertility is at a minimum in this regime due
to the increased opportunity cost in women's foregone wages with no decrease in
time allocated to childcare. We see the
lowest fertility nations (
Aggregate Evidence on the Link Between Age Structure and Productivity, Population and Development Review, March 2008.
This paper looks at both cross country and US state level impacts of demographic structure on productivity.
Did The Rust Belt Become Shiny?: A Study of Cities and Counties That Lost Steel and Auto Jobs in the 1980s,” with Bruce Sacerdote and Ariel Stern, Brookings-Wharton Papers on Urban Affairs 2007, 41-89.
In this paper, we undertake a study of one of the biggest negative shocks to affect the US economy in the past fifty years, namely, the massive loss of steel- and auto-related jobs in the early 1980s, which they refer to collectively as the Rust Belt shock. Researchers assemble total employment, industry-level employment, population, labor force participation, and income data at the level of the county and the metropolitan statistical area. Their basic approach is to regress short- and long-run changes in outcomes on the size of the Rust Belt shock. One area for further research is to examine more deeply the speed of adjustment to steel and auto shocks in Europe and to see whether Europe's lower mobility meant inherently slower adjustment or whether firms were able to move quickly to the immobile workers. Their results for the UK suggest that adjustment was indeed slower there and that labor force participation fell, while population grew more slowly in affected regions.
Reappraising The Legacy Of Colonialism : The Value Of An Island Sample. A Reply to Bertram,” with Bruce Sacerdote, Islands Studies Journal, November 2007, 2(2).
In this brief article, we respond to Geoff Bertram's overview of the current state of research into the legacy of colonial institutions. We make the general case for islands as a useful unit of observation in thinking about cross country income differences. The nature of island exploration and settlement provides a unique natural experiment that is not available in a mainland sample of countries. However, we feel that the results provide useful insights to the general literature about the relationship between colonialism and income. We also respond to Bertram's criticisms of our data and sample selection. In many cases, problems he identifies have been addressed in the most recent version of our work.
The Marginal Product of Capital , with Francesco Caselli, Quarterly Journal of Economics, May 2007
Whether or not the marginal product of capital (MPK) differs across countries is a question that keeps coming up in discussions of comparative economic development and patterns of capital flows. Using easily accessible macroeconomic data we find that MPKs are remarkably similar across countries. Hence, there is no prima facie support for the view that international credit frictions play a major role in preventing capital flows from rich to poor countries. Lower capital ratios in these countries are instead attributable to lower endowments of complementary factors and lower efficiency, as well as to lower prices of output goods relative to capital. We also show that properly accounting for the share of income accruing to reproducible capital is critical to reach these conclusions. One implication of our findings is that increased aid flows to developing countries will not significantly increase these countries' capital stocks and incomes.
Demographics and Productivity , Review of Economics and Statistics, February 2007
examines the impact of workforce demographics on aggregate productivity.
The age structure of the workforce is found to have a significant impact on
aggregate productivity. A large cohort of workers aged 40 to 49 is found to
have a large positive impact on productivity. Out of sample predictions
of output growth from 1990 to 1995 predict 17% of actual output growth differences
across a sample of 108 countries. The results suggest a partial
explanation for the productivity slowdown in the seventies and the boom in the
nineties. This paper estimates that
"A Contribution To The Empirics of Total Factor Productivity ," with Shekhar Aiyar, Manuscript.
Our paper analyzes the causal links between human capital accumulation and growth in total factor productivity (TFP). In particular, it tests the Nelson-Phelps hypothesis that human capital is crucial in enabling the imitation of technologies developed at the frontier. To this end we calculate TFP for a sample of 86 heterogeneous countries over the period 1960-1990 and investigate whether there has been (conditional) convergence in TFP. Our regressions use a variety of GMM estimators in a dynamic panel framework with fixed effects. Human capital is found to have a positive and significant effect on the long run growth path of TFP. Countries are found to be converging to these growth paths at a rate of about 3% a year. This work goes some way in resolving the debate over whether factor accumulation or TFP increases are more important for economic growth; while TFP differences explain most of the static variation in GDP across countries, human capital accumulation is a crucial determinant of the dynamic path of TFP
"Technological Leadership and Endogenous Growth," with Susanto Basu and David N. Weil, Manuscript.
We investigate the interaction between
technological leadership and spillovers through a theoretical model where
technological followers benefit from spillovers from
technological leader. Simulations of the model show that technological leadership is persistent and history dependent. A more patient nation may choose to remain behind an impatient technological leader in order to benefit from spillovers. The result is lower steady state growth than would occur if the more patient nation took leadership. The probability of a persistent, impatient leader is higher the more easily technology flows between nations.
Updated: 24 May 24, 2018