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2020 Robert Day School Publications and Grants

*Indicates student co-author

Bjerk, David and Eric Helland. "What Can DNA Exonerations Tell Us About Racial Differences in Wrongful Conviction Rates?" Journal of Law and Economics, vol. 63, issue 2, 2020, 341-366.

Abstract: We show that data on DNA exonerations can be informative about racial differences in wrongful conviction rates under some assumptions regarding the DNA exoneration process. We argue that with respect to rape cases, the observed data and the plausibility of the required assumptions combine to indicate that the wrongful conviction rate is significantly higher among black convicts than white convicts. By contrast, we argue that the ability of data on DNA exonerations to reveal information about racial differences in wrongful conviction rates for murder is much more limited.

Burdekin, Richard C.K. “Economic and Financial Effects of the 1918-1919 Spanish Flu Pandemic.” Journal of Infectious Diseases and Therapy, vol. 8, issue 6, 2020, 1000439.

Abstract: The 1918-1919 Spanish Flu represented the biggest worldwide health threat prior to the 2020 coronavirus pandemic. Although its mortality effects have been widely studied, much less has been done to assess its economic and financial impact. This mini review incorporates findings from recent studies of the Spanish Flu’s effect on economic performance and stock market performance in the United States and worldwide. Although US impacts may have been very short-lived, more pervasive effects seem evident in other countries. It also appears that contemporary stock market participants reacted significantly, and negatively, to the surging death rates that were seen during the Spanish Flu.


Burdekin, Richard C.K. “The US Money Explosion of 2020, Monetarism and Inflation: Plagued by History?” Modern Economy, vol. 11, 2020 pp. 1887-1900.

Abstract: Although the Federal Reserve’s quantitative easing of early 2020 was comparable in scale to 2008-2009, the implications for the growth of money in circulation and future inflationary pressures appear quite different. Absent the unprecedented surge in bank excess reserve ratios seen in 2008 and after, massive monetary base increases imply the possibility of a much larger, and potentially worrisome, increase in the money in circulation. Rising inflation expectations are implied by such phenomena as the surging demand for Treasury Inflation Protected Securities and record highs for gold prices during the summer of 2020. These trends lend some support to market participants evincing concern that the surging money growth is, in fact, a precursor to future inflation. Historical perspective on the 2020 situation is provided by data from the time of the 1918-1919 Spanish flu and available documentation of inflation following medieval and Roman-era pandemics. Indications of extra upward pressure on prices arising from pent-up spending after the epidemic has passed include the surge in bank loans in the aftermath of the 1918-1919 Spanish Flu pandemic.


Burdekin, Richard C.K. and Ran Tao. “Chinese Liquidity Effects on the Australian Macroeconomy, 2002-2017.” Applied Economics, vol. 52, issue 18, 2020, pp. 1973-1985.

Abstract: China's growing importance to the Australian economy has been well recognized in policy circles but remained relatively untested in formal empirical analysis. This paper examines the reactions of Australian macroeconomic variables to Chinese money growth and inflation over the post-2002 period using VAR estimation, historical decompositions and long-run cointegration models. The consistent impact of Chinese money growth on Australian inflation and on the exchange rate seen in the VAR analysis is supplemented by evidence of cointegrating relationships between the Australian variables and both Chinese money growth and Chinese inflation.

Dass, Nishant, Vikram Nanda, and Qinghai Wang. “Within-Syndicate Conflicts, Loan Covenants, and Syndicate Formation.” Financial Management, vol. 49, issue 2, 2020, pp. 547-583.

Abstract: We study how conflicts within a lending syndicate affect loan contract and syndicate formation. We argue that loan provisions serve an important dual function: In addition to moderating borrower–lender conflicts, they reduce within‐syndicate conflicts. We show that greater potential for within‐syndicate conflicts is associated with more and stricter covenants. Loans are less restrictive when the interests of participants and the lead arrangers are better aligned, for example, when participant–banks have stronger relationships with the lead arranger or hold borrower's equity (indirectly). Overall, our results show that covenant choice, syndicate formation, and lead arranger's loan allocation all play an important role in reducing within‐syndicate conflicts.

Aldy, Joseph, Matthew Kotchen, Mary Evans, Meredith Fowlie, Arik Levinson, and Karen Palmer. “Deep Flaws in a Mercury Regulatory Analysis.” Science, vol. 368, issue 6488, 2020, pp. 247-248.

Abstract: The U.S. Environmental Protection Agency (EPA) has proposed to roll back the legal basis of its Mercury and Air Toxics Standards (MATS), in part on the basis of a benefit-cost analysis (BCA) that is seriously flawed in three ways (1, 2). The analysis disregards economically important but indirect public health benefits, or “co-benefits,” in a manner inconsistent with economic fundamentals. It fails to account for recent science that identifies important sources of direct health benefits from the reduction of mercury emissions. And it ignores transformative changes in the structure and operations of the electricity sector over the past decade. These analytical shortcomings run counter to long-standing guidance for economic analysis from the U.S. Office of Management and Budget (OMB) and from the EPA itself. If finalized, the new rule will undermine continued implementation of MATS and set a concerning precedent for use of similarly inappropriate analyses in the evaluation of other regulations.


Evans, Mary F., and Laura O. Taylor, “Using Revealed Preference Methods to Estimate the Value of Reduced Mortality Risk: Best Practice Recommendations for the Hedonic Wage Model.” Review of Environmental Economics and Policy, vol. 14, no. 2, 2020, pp. 282-301.

Abstract: The hedonic wage model provides a key input into benefit-cost analyses of public policies that are aimed at reducing mortality risks: an estimate of the value of reduced mortality risk (VRMR), also known as the value of a statistical life. Because a large majority of the benefits associated with policies that improve air quality stem from mortality risk reductions, estimates of the VRMR play an exceptionally important role. The use of VRMR estimates from hedonic wage studies in benefit-cost analyses of environmental policies is not without controversy. This article reviews the use and importance of the VRMR in environmental regulation and policy and summarizes the major shortcomings of existing VRMR estimates derived from hedonic wage models. We propose a set of best practices for estimating and reporting VRMR estimates using the hedonic wage framework.

Fernholz, Ricardo T., and Robert. Fernholz. “Zipf's Law for Atlas Models.” Journal of Applied Probability, vol. 57, issue 4, 2020, pp. 1276-1297.

Abstract: A set of data with positive values follows a Pareto distribution if the log-log plot of value versus rank is approximately a straight line. A Pareto distribution satisfies Zipf's law if the log-log plot has a slope of -1. Since many types of ranked data follow Zipf's law, it is considered a form of universality. We propose a mathematical explanation for this phenomenon based on Atlas models and first-order models, systems of strictly positive continuous semimartingales with parameters that depend only on rank. We show that the stationary distribution of an Atlas model will follow Zipf's law if and only if two natural conditions, conservation and completeness, are satisfied. Since Atlas models and first-order models can be constructed to approximate systems of time-dependent rank-based data, our results can explain the universality of Zipf's law for such systems. However, ranked data generated by other means may follow non-Zipfian Pareto distributions. Hence, our results explain why Zipf's law holds for word frequency, firm size, household wealth, and city size, while it does not hold for earthquake magnitude, cumulative book sales, and the intensity of wars, all of which follow non-Zipfian Pareto distributions.

Filson, Darren. “The Impact of Eisenhower Medical Center on the Coachella Valley Economy and the Three-City Region Composed of Palm Desert, Rancho Mirage and Indian Wells.” Eisenhower Medical Center, 2020.

Abstract: This report was produced for Eisenhower Medical Center. The report provides four sets of estimates: 1. Annual impacts of Eisenhower Medical Center (EMC)'s current operations on output (revenues), economic activity (value added), employment and employee earnings in the Coachella Valley. 2. Comparisons of EMC's annual impacts on the Valley to those of the Valley's retail, hotel and motel, and restaurant industries. 3. A projection of the impacts of EMC's ongoing and planned construction activities on the Valley. 4. The annual impacts of EMC's current operations and employees (excluding the construction activities) on the 3-city region composed of Palm Desert, Rancho Mirage and Indian Wells.

Curtis, Chadwick C., Julio Garín, and M. Saif Mehkari. "Repatriation Taxes.” Review of Economic Dynamics, vol. 36, 2020, pp. 293-313.

Abstract: We present a model of a multinational firm to quantify the effects of policy changes in repatriation tax rates. The framework captures the dynamic responses of the firm from the time a policy change is anticipated through its enactment, including its long-run effects. We find that failing to account for anticipatory behavior surrounding a reduction in repatriation tax rates overstates the amount of profits repatriated from abroad and underestimates tax revenue losses. We further show that policy changes have a relatively small impact on hiring and investment decisions if firms have relatively easy access to credit markets - as is the case for most multinational firms. Finally, by altering the relative price of holding assets abroad, news of a future reduction in repatriation tax rates acts as an implicit tax on repatriating funds today. We capture and quantify this "shadow tax."

Gelman, Michael, Shachar Kariv, Matthew D. Shapiro, Dan Silverman, and Steven Tadelis. “How Individuals Respond to a Liquidity Shock: Evidence from the 2013 Government Shutdown.” Journal of Public Economics, vol. 189, 2020, 103917.

Abstract: Using comprehensive account records, this paper examines how individuals adjusted spending and saving in response to a temporary drop in liquidity due to the 2013 U.S. government shutdown. The shutdown cut paychecks by 40% for affected employees, which was recovered within 2 weeks. Because the shutdown affected only the timing of payments, it provides a distinctive experiment allowing estimates of the response to a liquidity shock holding income constant. Spending dropped sharply, implying a naïve estimate of 58 cents less spending for every dollar of lost liquidity. This estimate overstates the consumption response. While many individuals had low liquid assets, they used multiple sources of short-term liquidity to smooth consumption. Sources of short-term liquidity include delaying recurring payments such as for mortgages and credit card balances.

Grant, Laura, and Christian Langpap. “Willingness to Contribute as a Component of the Social Cost of Water Pollution." Land Economics, vol. 96, no. 4, 2020, pp. 573-588.

Abstract: Individuals contribute significant sums to environmental organizations, such as water-related groups, whose goals are to preserve and improve local water quality. These groups also fundraise to support these goals. However, the social cost of water pollution lacks contributions to water groups and their fundraising expenditures. If contributions and fundraising respond to changes in local water quality, there is a willingness to contribute toward mitigation of water pollution. Social costs should count these values. We provide proof of concept for this argument, showing significant evidence of local water quality affecting contributions to environmental nonprofits, as well as fundraising expenditures.

Bjerk, David and Eric Helland. "What Can DNA Exonerations Tell Us About Racial Differences in Wrongful Conviction Rates?" Journal of Law and Economics, vol. 63, issue 2, 2020, 341-366.

Abstract: We show that data on DNA exonerations can be informative about racial differences in wrongful conviction rates under some assumptions regarding the DNA exoneration process. We argue that with respect to rape cases, the observed data and the plausibility of the required assumptions combine to indicate that the wrongful conviction rate is significantly higher among black convicts than white convicts. By contrast, we argue that the ability of data on DNA exonerations to reveal information about racial differences in wrongful conviction rates for murder is much more limited.

Harris, Alison, Aleena Young*, Livia Hughson, Danielle Green, Stacey N. Doan, Eric Hughson, and Catherine L. Reed. “Perceived Relative Social Status and Cognitive Load Influence Acceptance of Unfair Offers in the Ultimatum Game.” PLOS ONE, vol. 15, issue 1, 2020, e0227717.

Abstract: Participants in the Ultimatum Game will often reject unfair resource allocations at personal cost, reflecting a trade-off between financial gain and maintenance of social standing. Although this rejection behavior is linked to executive control, the exact role of cognitive regulation in relation to status cues is unclear. We propose that the salience of status cues affects how cognitive regulation resolves the conflict between financial gain and social status considerations. Situations that tax executive control by limiting available cognitive resources should increase acceptance rates for unfair offers, particularly when the conflict between economic self-interest and social reputation is high. Here, participants rated their own subjective social status, and then either mentally counted (Load) or ignored (No Load) simultaneously-presented tones while playing two rounds of the Ultimatum Game with an online (sham) "Proposer" of either high or low social status. A logistic regression revealed an interaction of Proposer status with cognitive load. Compared to the No Load group, the Load group showed higher acceptance rates for unfair offers from the high-status Proposer. In contrast, cognitive load did not influence acceptance rates for unfair offers from the low-status Proposer. Additionally, Proposer status interacted with the relative social distance between participant and Proposer. Participants close in social distance to the high-status Proposer were more likely to accept the unfair offer than those farther in social distance, whereas the opposite pattern was observed for offers from the low-status Proposer. Although rejection of unfair offers in the Ultimatum Game has previously been conceptualized as an intuitive response, these results instead suggest it reflects a deliberative strategy, dependent on cognitive resources, to prioritize social standing over short-term financial gain. This study reveals the dynamic interplay of cognitive resources and status concerns within this paradigm, providing new insights into when and why people reject inequitable divisions of resources.

Keil, Manfred. "The Inland Empire is on the Path to Recovery." San Bernardino Sun, March 26, 2020.

Abstract: After a deep recession starting in March 2020, San Bernardino County and Riverside County have been on an upswing since May. To fully recovery from the disastrously decline experienced earlier, the Leisure and Hospitality Sector has to recover further.


Keil, Manfred, and Robert Kleinhenz. "Inland Economy Still Managing to Move Forward During Coronavirus Pandemic." San Bernardino Sun, December 18, 2020.

Abstract: There will be four phases by which the Coronavirus business cycle will be remembered, ranging from the initial dramatic decline in output and employment, to the relatively fast partial recovery, a renewed slowdown due to the spread of the virus, and the final period of full recovery due to a large proportion of the population having been vaccinated.


Keil, Manfred, and Robert Kleinhenz. "The State of the Inland Empire Labor Market." San Bernardino Sun, November 20, 2020.

Abstract: Both the lack of completely opening businesses in the Leisure and Hospitality sector and the lack of consumer confidence in venturing out into restaurants, continue to strain the economic recovery from the Coronavirus shock. Job growth slowed down for the August to September period. Only nine of California's 58 counties had a higher unemployment rate.


Keil, Manfred, and Robert Kleinhenz. "Welcome to Hotel California? Losses in Tourism Industry Have Far-Reaching Impacts." San Bernardino Sun, October 11, 2020.

Abstract: The tourism industry, in particular hotels, restaurants, and amusement parks, have been particularly hard hit by the Coronavirus recession. Roughly 40% of all jobs lost from March to May 2020 were in the Leisure and Hospitality industry.


Keil, Manfred, and Yao Li*. “Think Smart as We Plan for Job Growth in the Inland Empire." The Press-Enterprise, February 11, 2020.

Abstract: The Inland Empire has seen spectacular job growth, outpacing most areas in Southern California, since 2014. Unfortunately this job growth has not coincide with income growth of the same magnitude, since many of the additional jobs created were in the logistics sector, which does not pay well.


Keil, Manfred and Fernando Lozano. "A Tale of Two Recessions and Recoveries.” San Bernardino Sun, December 5, 2020.

Abstract: The current recession and partial recovery is not evenly distribute across socio-economic groups. This is a K-shape recession with upper income employees having fully recovered, while lower income employees still suffering large income cuts as a group.

Barreca, Alan and Jessamyn Schaller. “The Impact of High Ambient Temperatures on Delivery Timing and Gestational Lengths.” Nature Climate Change, vol. 10, no. 1, 2020, pp. 77-82.

Abstract: Evidence suggests that heat exposure increases delivery risk for pregnant women. Acceleration of childbirth leads to shorter gestation, which has been linked to later health and cognitive outcomes. However, estimates of the aggregate gestational losses resulting from hot weather are lacking in the literature. Here, we use estimated shifts in daily county birth rates to quantify the gestational losses associated with heat in the United States from 1969 to 1988. We find that extreme heat causes an increase in deliveries on the day of exposure and on the following day and show that the additional births were accelerated by up to two weeks. We estimate that an average of 25,000 infants per year were born earlier as a result of heat exposure, with a total loss of more than 150,000 gestational days annually. Absent adaptation, climate projections suggest additional losses of 250,000 days of gestation per year by the end of the century.


Schaller, Jessamyn, Price Fishback, and Kelli Marquardt. "Local Economic Conditions and Fertility from the Great Depression through the Great Recession." AEA Papers and Proceedings, vol. 110, 2020, pp.  236-40.

Abstract: This paper reexamines the association between local economic conditions and fertility using a new dataset of county-level birthrates and per capita income in the United States spanning the period 1937-2016. Using a panel data model, we estimate that growth in local income is positively associated with birthrates over our entire sample period and that the strength of that association peaked during the 1960-1990 period and has declined in recent decades. We additionally estimate dynamic responses to local income shocks, finding that birthrates remain elevated for up to four years after a shock.

Chiu, Eric M.P. and Thomas D. Willett. “Capital Controls and Currency Crises Revisited: A Political Economy Analysis.” Emerging Markets Finance and Trade, vol. 56, issue 12, 2020, pp. 2908-2928.

Abstract: Recent empirical studies have reached mixed results on the effects of capital controls and currency crises. We argue that this relationship is likely to depend both on whether controls are primarily on capital inflows or outflows and on the stability of the government. Using the disaggregated data on capital controls using the newly developed disaggregated data on capital controls for a sample of 56 countries for a sample of 56 countries over the period 1995–2015, we discover some interesting patterns on capital controls and political stability that there is a vanishing middle in terms of the extent of controls and that the use of controls is positively associated with government stability. We also find strong support for the proposition that controls on outflows are positively associated with the probability of currency crises especially under less stable governments, while controls on capital inflows reduce the risks of currency crises, especially for more stable governments.


Iamtrakul, Kawin, and Thomas Willett. “The Effects of Monetary and Fiscal Policies on the Output Costs of Sudden Stops.” Journal of International Commerce, Economics and Policy, vol. 11, no. 2, 2020, 205009.

Abstract: There has been controversy about the appropriate responses of monetary and fiscal policies to sudden stops of capital inflows. There have been concerns that expansionary policies could undermine confidence leading to currency depreciation and a worsening of the crisis. Previous literature has generally found favorable effects from fiscal expansion and mixed results for monetary policy. We revisit this issue using more recent data and alternative measures of monetary policy. We find considerable support for the view that expansionary monetary policy reduces output costs of sudden stops and no significant evidence that the costs are increased. We find that fiscal expansion by countries with low levels of debt is expansionary, but that these effects can become negative at high levels of debt.

Li, Haitao, Xiaoxia Ye, and Fan Yu. "Unifying Gaussian Dynamic Term Structure Models from a Heath-Jarrow-Morton Perspective.” European Journal of Operational Research, vol. 286, issue 3, 2020, pp. 1153-1167.

Abstract: In this paper, we show that most existing Gaussian dynamic term structure models (GDTSMs) can be nested as special cases under a unified Heath-Jarrow-Morton (HJM)-based framework of GDTSM construction. Our study provides not only a systematic way to examine the commonality of many seemingly distinct GDTSMs, but also a novel and convenient approach to constructing GDTSMs that are otherwise unavailable or intractable under the traditional approach. In our empirical study using the Euro area forward rates, we conduct a specification analysis based on this novel approach. The analysis reveals that the traditional models impose restrictive constraints limiting their flexibility in capturing key features of the correlations and volatilities of the forward rates.


Wang, Honglin, Fan Yu, and Yinggang Zhou. “Property Investment and Rental Rate under Housing Price Uncertainty: A Real Options Approach.” Real Estate Economics, vol. 48, issue 2, 2020, pp. 633-665.

Abstract: The conventional wisdom that housing prices are the present value of future rents ignores the fact that unlike dividends on stocks, rent is not discretionary. Housing price uncertainty can affect household property investments, which in turn affect rent. By extending the theory of investment under uncertainty, we model the renter's decision to buy a house and the landlord's decision to sell as the exercising of real options of waiting and examine real options effects on rent. Using data from Hong Kong and mainland China, we find a significant effect of housing price on rent and draw important policy implications.