AEA Research Highlights

Between 2006 and 2013, China's government poured enormous resources into its shipbuilding industry through various subsidies—from providing free coastal land to offering financing assistance for ship buyers. But estimating the true scale and impact of these policies is challenging, as governments are often opaque about their industrial support programs.

In a paper in the Journal of Economic Perspectives, authors Panle Jia Barwick, Myrto Kalouptsidi, and Nahim Bin Zahur developed new methods for overcoming these measurement challenges and quantifying China's support for its shipbuilding industry.

Their research reveals which types of industrial policies work best, when they should be implemented, and why countries might pursue them even when the direct economic returns are low. These insights are particularly relevant today, as countries around the world are increasingly embracing industrial policies to support strategic sectors.

Barwick and Kalouptsidi recently spoke with Tyler Smith about how they measured China's shipbuilding subsidies, why entry subsidies are particularly inefficient, and the importance of timing industrial support with market cycles

A growing number of US households hire advisers to assist with major financial decisions, such as planning life events or making portfolio choices for retirement. But some advisers exploit the inherent complexity of these decisions and the lack of sophistication of their clients to benefit themselves.

In a paper in the Journal of Economic Perspectives, Mark Egan, Gregor Matvos, and Amit Seru show that about 7 percent of financial advisers have serious misconduct records, with rates reaching nearly 30 percent in some regions and firms. The authors explain why misconduct clusters in certain firms and geographic areas, particularly those with wealthy but less financially sophisticated populations.

Importantly, the researchers also show that widely publicizing the names of the firms with the highest misconduct rates can lead to a substantial reduction in misconduct.

Egan recently spoke with Tyler Smith about how the complex regulatory landscape of financial advising creates potential confusion for consumers and the best ways to clean up the industry.

In 2017, then-President Trump signed into law the Tax Cut and Jobs Act, which was arguably the largest corporate tax cut in US history. The TCJA significantly lowered the statutory rate that corporations pay in taxes and reshaped numerous tax rules. Proponents said it would boost US competitiveness on the international stage and juice business investment. But its overall effects are still being debated among economists.

In a paper in the Journal of Economic Perspectives, authors Gabriel Chodorow-Reich, Owen Zidar, and Eric Zwick explored the current understanding of the TCJA, discussing its costs and benefits, as well as future policy implications. They argue that, contrary to what some proponents said, the tax cuts significantly reduced tax revenues.

Zwick recently spoke with Tyler Smith about the legislation, who benefited the most from the bill, and whether provisions that are set to expire in the coming years should be retained.

A half a century ago, new high-yield varieties of crops were introduced to India, and it transformed the country's farming. This so-called "Green Revolution" significantly boosted agricultural output, allaying concerns about famine and food security. But it may have had some unanticipated consequences for long-term health outcomes.

In a paper in the American Economic Journal: Applied Economics, authors Sheetal Sekhri and Gauri Kartini Shastry show that the areas where agricultural productivity accelerated the most also saw the highest rates of diabetes among men later in life. The authors argue that substantial changes to the diets of mothers and young children, in the form of higher levels of rice consumption, likely increased the risks of chronic diseases.

The findings suggest that dietary diversification should accompany efforts to promote agricultural production.

Sekhri recently spoke with Tyler Smith about how the Green Revolution changed diets in India and why it led to a rise in diet-related diseases like diabetes.

Qualitative accounts of anthropologists indicate that social structure plays an important role in how resources are shared in society. But quantitative evidence measuring the impacts of social organization on financial ties and transfers has been lacking.

In a paper in the American Economic Review, authors Jacob Moscona and Awa Ambra Seck helped to fill that gap. They found that in East Africa, cash transfer policies had very different effects in cultures organized by kinship ties compared to cultures organized around age groups.

The findings suggest that social organization has a deep impact on how resources spread through economies and ultimately shape inequality.

Jacob Moscona recently spoke with Tyler Smith about the difference between kin-based societies and age-based societies and how they affect development policies.

The Paycheck Protection Program (PPP) was launched at the height of the COVID-19 pandemic in the hopes that it would keep businesses from laying off workers during government shutdown measures taken to contain the spread of the disease.

Initial estimates of the direct impacts have been mixed, with some studies suggesting that the cost was hundreds of thousands of dollars per job saved.

But a paper in the American Economic Journal: Economic Policy looked beyond the labor market at a second order effect showing a clear and positive benefit. Authors Sumit Agarwal, Brent W. Ambrose, Luis A. Lopez, Xue Xiao found that the PPP reduced mortgage delinquencies for commercial real estate by roughly $36 billion in 2020 and likely played an important role in averting wider distress in financial markets.

Ambrose recently spoke with Tyler Smith about the impact of PPP loans on the commercial real estate market and ways in which the program could have been better targeted.

In 2005, Austria's most prominent far-right party proclaimed a "Third Turkish Siege of Vienna." The campaign warned voters that, like their ancestors who were almost overrun by the Ottoman Empire four centuries ago, they were being culturally invaded by Muslims. The campaigners hoped to use long-past historical events to shape the behavior and sentiments of modern-day voters. But did it work?

The strategy sparked a surge in the far-right's vote share and a wave of anti-Muslim sentiment, according to a paper in the American Economic Journal: Applied Economics. The authors, Christian Ochsner and Felix Roesel, studied areas with ties to the historical trauma of the Sieges of Vienna and explained how political innovators reinvigorated latent xenophobic narratives that mobilized voters.

Ochsner recently spoke with Tyler Smith about the recent political environment in Austria, the use of historical parallels, and the impact on Muslim minorities.

In 1993, the North American Free Trade Agreement (NAFTA) was passed with bipartisan support and near universal endorsement by economists. In hindsight, the economic costs and political consequences were far greater than many contemporary observers would have imagined.

In a paper in the American Economic Review, authors Jiwon Choi, Ilyana Kuziemko, Ebonya Washington, and Gavin Wright found that US counties most exposed to NAFTA and Mexican import competition saw their total employment drop by roughly 6 percent compared to those with little exposure to the trade deal. However, workers in these communities didn't respond by moving away to find better opportunities, and many, feeling betrayed by the Democratic party, embraced the Republican party instead.

Choi and Wright recently spoke with Tyler Smith about the economic and political history of NAFTA and what economists have learned since its passage.

Since 2014, over 15,000 migrants have died or gone missing trying to make the voyage from the north coast of Africa to southern Europe. In response, European authorities have launched several search and rescue operations. There are few signs that migration along this deadly route is slowing down. In fact, efforts to curb migrant deaths may encourage even more migrants to make the perilous journey.

In a paper in the American Economic Journal: Economic Policy, authors Claudio Deiana, Vikram Maheshri, and Giovanni Mastrobuoni found evidence that migrants and smugglers responded to search and rescue operations by attempting even more dangerous crossings. However, the authors still say that such operations are likely beneficial to migrants on the whole.

Maheshri recently spoke with Tyler Smith about the impact of search and rescue operations on the market for smuggling along the Central Mediterranean Route and what policymakers should do to reduce migrant deaths.