"Some Economic Puzzles"

David Friedman:

Visiting China last year, I was struck by an interesting puzzle. In the U.S., if you are in a big building selling clothes or groceries, a department store or a supermarket, the people selling them to you are employees of the firm that owns the building. In China, you are much more likely to be in a building whose owners rent it out in small pieces to a lot of individual sellers. Instead of a supermarket, you have a large building with half a dozen butcher stalls, eight fish stalls, ...  . Instead of a department store, you have the same pattern with different stalls selling different sorts of clothing, jewelery [sic], electronics. 

"Chicago's Pension Liabilities Seen Swelling Despite Efforts"

A summary of a recent Moody's report.

Chicago's unfunded pension obligations could continue to swell for at least the next decade, Moody's Investors Service believes.

And that's the good news offered in a new Moody's report, under a best-case scenario with public safety pension funds benefitting from a record property tax hike and assuming the city prevails on pending political and legal challenges.

Link via the very interesting if often discouraging PensionTsunami.

Related: "In Chicago, Rahm Emanuel Faces a Crisis Brought on by Progressive Politics".

Abstracts of three articles in or forthcoming in the Review of Economics and Statistics

"Are Tenure Track Professors Better Teachers?"

This study makes use of detailed student-level data from eight cohorts of first-year students at Northwestern University to investigate the relative effects of tenure track/tenured versus contingent faculty on student learning. We focus on classes taken during a student’s first term at Northwestern and employ an identification strategy in which we control for both student-level fixed effects and next-class-taken fixed effects to measure the degree to which contingent faculty contribute more or less to lasting student learning than do other faculty. We find consistent evidence that students learn relatively more from contingent faculty in their firstterm courses. This result is driven by the fact that the bottom quarter of tenure track/tenured faculty (as indicted by our measure of teaching effectiveness) has lower “value added” than their contingent counterparts. Differences between contingent and tenure track/tenured faculty are present across a wide variety of subject areas and are particularly pronounced for Northwestern’s averages and less-qualified students.

"Does Planning Regulation Protect Independent Retailers?"

Regulations curbing the entry of large retail stores have been introduced in many countries to protect independent retailers. Analyzing a planning reform launched in the United Kingdom in the 1990s, I show that independent retailers were actually harmed by the creation of entry barriers against large stores. This is because the entry barriers created the incentive for large retail chains to invest in smaller and more centrally located formats, which competed more directly with independents and accelerated their decline. Overall, these findings suggest that restricting the entry of large stores may exert negative competitive effects on independent retailers.

"Under the Cover of Darkness: How Ambient Light Influences Criminal Activity".

We exploit daylight saving time (DST) as an exogenous shock to daylight, using both the discontinuous nature of the policy and the 2007 extension of DST, to consider the impact of light on criminal activity. Regression discontinuity estimates show a 7% decrease in robberies following the shift to DST. As expected, effects are largest during the hours directly affected by the shift in daylight. We discuss our findings within the context of criminal decision making and labor supply, and estimate that the 2007 DST extension resulted in $59 million in annual social cost savings from avoided robberies.