Christos Makridis

Converging Technologies: A Critical Analysis of Cognitive Enhancement for Public Policy Application

This paper investigates cognitive enhancement, specifically biological cognitive enhancement (BCE), as a converging technology, and its implications for public policy. With an increasing rate of technological advancements, the legal, social, and economic frameworks lag behind the scientific advancements that they support. This lag poses significant challenges for policymakers if it is not dealt with sufficiently within the right analytical context. Therefore, the driving question behind this paper is, “What contingencies inform the advancement of biological cognitive enhancement, and what would society look like under this set of assumptions?” The paper is divided into five components: (1) defining the current policy context for BCEs, (2) analyzing the current social and economic outcomes to BCEs, (3) investigating the context of cost-benefit arguments in relation to BCEs, (4) proposing an analytical model for evaluating contingencies for BCE development, and (5) evaluating a simulated policy, social, technological, and economic context given the contingencies. In order to manage the risk and uncertainty inherent in technological change, BCEs’ drivers must be scrutinized and evaluated.

A Tale of Two Countries: Markets and Transboundary Water Governance Between the United States and Mexico

While there is a robust literature about using tradeable permits as a solution to pollution externalities, less work has applied these principles to the area of transboundary water management. This article proposes the use of transboundary water banking as a means for addressing issues of water externalities, conflict over water resources, and incentive compatibility. First, the article provides clarity to this discussion by synthesizing relevant literature over transboundary water governance, focusing on the experience between the United States and Mexico over the Colorado River. Second, the article formalizes the idea of a transboundary water bank and the efficiency of an auctioned versus grandfathered permit program. Third, the article provides a brief formulation of the market design elements of such a scheme, namely four conditions that enable a sort of Nash Equilibrium among agents. The article concludes by alluding to the parallels between energy and water markets. While only a start, this article seeks to catalyze more formal mathematical modeling of solutions to transboundary water governance.

Do Managers Matter? A Natural Experiment from 42 R&D Labs in India

We exploit plausibly exogenous variation in the staggered entry of new managers into India’s 42 public R&D labs between 1994 and 2006 to study how alignment between the CEO and middle-level managers affects research productivity. We show that the introduction of new lab managers aligned with the national R&D reforms raised patenting and multinational licensing revenues by 58% and 75%, respectively, and scientist research productivity, including: a 16%, 10%, 11%, and 22% increase in h-indices, number of coauthors, publications, and citations per scientist, respectively. Using natural language processing techniques on the set of research abstracts produced among these scientists, we also find that overall mood and sentiment increased by 8.5% following the first managerial change. (JEL L22, L23, O32, O33)

Sentimental Business Cycles and the Protracted Great Recession

Using newly licensed individual-level data from Gallup between 2008 and 2017, this paper provides microeconomic evidence that sentiments about economic activity played an important role in amplifying and propagating the Great Recession. First, after controlling for aggregate shocks, a 1pp rise in county employment and housing price growth is associated with a 0.30sd and 0.67sd rise in perceptions about the current state of the economy and a 0.12pp and 0.27pp rise in perceptions the economy is improving. Second, exploiting plausibly exogenous variation in the 2016 Presidential election, consumption of non-durable goods grew by 4.2% with a larger 10-12% increase among conservatives. The causal effect of sentiment on consumption is robust to three separate instrumental variables strategies: a state Bartik-like measure of gasoline price shocks, county fluctuations in daily temperature, and exposure to different housing price shocks through social networks. A back-of-the-envelope calculation suggests that the decline in sentiment can account for 34-68% of the decline in consumption during the Great Recession and an additional 14-43 months of delayed recovery.

(Why) Is There a Public/Private Pay Gap?

The government is facing a severe shortage of skilled workers. The conventional wisdom in branches of policy and public administration is that the shortage is driven by low salaries that are not competitive for attracting top talent. Using longitudinal data on high skilled workers between 1993 and 2013, this paper shows that, if anything, government employees earn more than their private sector counterparts. Although government workers tend to earn less in the raw data, these differences are driven by the correlation between unobserved productivity and selection into private sector jobs. Instead, this paper provides empirical evidence that low non-pecuniary amenities, such as development opportunities and management, can explain earnings differences between the public and private sectors.

Housing Market Regulation and Labor Market Dynamism

The United States labor market has become less dynamic over the past three decades. This paper explores the contribution of housing market regulation towards these declines. First, a 1sd rise in housing market regulation is associated with a 0.11-0.22sd decline in the turnover rate. Second, these declines originate from a heightened cost of living, which drives up wages and depresses the demand for labor. Third, a back-of-the-envelope exercise suggests that, given the estimated elasticities, the rise in housing market regulation accounts for 12-24% of the decline in worker reallocation between 1990 and 2009.

Do Right-to-Work Laws Work? Evidence from Individual Well-Being and Economic Sentiment

AbstractThis paper investigates the effects of state right-to-work (RTW) laws on individuals’ well-being and economic sentiment. Using licensed microdata from Gallup between 2008 and 2017, this paper finds that the adoption of RTW laws is associated with a .029 SD and a .041 SD increase in individuals’ life satisfaction and economic sentiment, respectively. A difference-in-differences estimator suggests that these improvements are concentrated among union workers. These results are robust to entropy balancing and border-pair approaches. Moreover, these improvements in well-being are consistent with an increase in competition among unions, which prompts them to provide higher-quality services that are valued by their members.

Is Cash Still King: Why Firms Offer Non-Wage Compensation and the Implications for Shareholder Value

Why do firms offer non-wage compensation instead of the equivalent amount in financial compensation? We argue that firms use non-wage benefits, specifically maternity leave, to efficiently target workers with desirable characteristics. Using Glassdoor data, we show that firms offer higher quality maternity benefits in industries and locations where female talent is relatively scarce -- a relationship robust to an instrumental variable analysis. Second, using plausibly exogenous variation in the timing of government policy, we show that these benefits can increase firm value. Third, we document novel stylized facts about non-wage benefits and how they are correlated with firm characteristics.Over the past 40 years, the share of non-wage benefits in employee compensation grew from 5% to 30%. Using disaggregated data from Glassdoor, we first document a series of stylized facts about the availability of non-wage benefits and how these benefits are correlated with firm characteristics. We subsequently test three non-mutually exclusive hypotheses explaining the cross-section of non-wage benefits: (i) tax advantages, (ii) attracting and retaining specific employee groups, and (iii) mitigating the disutility of work. We find empirical evidence in support of all three hypotheses. Moreover, firms with higher rated benefits exhibit larger ex-post equity returns, suggesting that differences in non-cash types of compensation are not fully priced by the market. Affiliations: †Kenan-Flagler Business School, University of North Carolina; ‡Department of Economics, Department of Management Science & Engineering, Stanford University; ∗Sauder School of Business, University of British Columbia. E-mails: timjliu@kenan-flagler.unc.edu, cmakridi@stanford.edu, paige_ouimet@unc.edu, elena.simintzi@sauder.ubc.ca. Acknowledgments: We would like to thank Andrew Chamberlain and Glassdoor for their help with the data.

On the Cyclicality of Real Wages and Employment: New Evidence and Stylized Facts from Performance Pay and Fixed Wage Jobs

Using the National Compensation Survey between 2004-2014, we document substantial cyclical heterogeneity among performance pay and fixed wage jobs. We find that employment growth in performance pay (fixed wage) jobs is countercyclical (procyclical), whereas compensation per employee growth is procyclical (countercyclical). Our estimates are identified off the response of similar work levels within the same establishment to local area shocks. We provide two mechanisms: (i) procyclical (countercyclical) effort in performance pay (fixed wage) jobs, and (ii) high pay-sensitivity in performance pay jobs. Our results reconcile competing claims about the wage stickiness of new hires versus incumbents in search models.Using the National Compensation Survey between 2004-2017, we document three stylized facts and quantify cyclical heterogeneity among performance pay and fixed wage jobs. First, there is substantial dispersion in the incidence of performance pay, even within the same occupation; hourly compensation growth in performance pay job has been nearly three-times as large as that in fixed wage jobs; the share of performance pay is increasing in employer size. Second, we find that performance pay jobs respond primarily by adjusting the intensive margin of hourly compensation over the business cycle, whereas fixed wage jobs respond by adjusting the extensive margin of employment. Our estimates are identified off of comparisons of similar jobs within the same establishment over time. We provide suggestive evidence that performance pay allows firms to adjust more easily to uncertainty over the business cycle.

Well-Being and Large Financial Shocks: Evidence from Foreclosures between 2008-2014

Using microdata from CoreLogic and Gallup between 2008 and 2014, we study the impact of foreclosures on individual well-being. We identify the causal effect of foreclosures by instrumenting them using variation in interest rate spikes associated with different types of adjustable rate mortgages (ARMs), conditional on controls and zipcode and time fixed effects. We find that a 10% rise in foreclosures is associated with a 0.53% and 0.23% decline in current and expected future life satisfaction. These effects are driven by a combination of lower local amenities (e.g., neighborhood quality) and greater uncertainty (e.g., income risk).Abstract This paper explores the causal effect of foreclosure on individual well-being and social capital. Using plausibly exogenous variation in the timing of interest rate changes on different types of adjustable rate mortgages (ARMs), we find that a 10% rise in foreclosures is associated with a 0.58% and 0.28% decline in current and expected future life satisfaction. These effects are primarily driven by the effects on local optimism and social capital. The results are consistent with models of spatial externalities where large-scale shocks generate adverse effects on communities, not just individuals.