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Can Both the United States and China Be Winners in a Global Technology Race?

By Jennifer Hunt·July 25, 2018
Rutgers University

The Issue:

Recent trade barriers erected by the Trump administration are motivated in part by fear of China’s “Made in China 2025” program, which aims to increase Chinese innovation and upgrade the production methods used in Chinese manufacturing from labor-intensive to high-tech. There is also anxiety in the United States about the erosion of the U.S. lead in patenting and scientific publications. Are advances in Chinese technology bad for the United States?

The Facts:

  • Technological innovation, of which patents are one measure, is an important contributor to economic growth. Firms that innovate grow faster, creating a dynamic of workers and resources shifting to the more innovative firms. At the country level, firms’ collective innovation spurs productivity growth and hence overall economic growth.
  • Innovation in one country benefits other countries. American consumers or American firms using intermediate goods or services can buy imports of the new, improved or cheaper products that are the fruit of the foreign innovation. Even more importantly, innovations made abroad are often adopted in the United States: researchers estimate that while 60 percent of U.S. productivity growth stems from domestic innovation, the rest comes from innovation abroad.
  • However, the benefits generated by domestic innovation are greater than those derived from innovation abroad. Foreign innovation is generally adopted only with a lag and cannot always be implemented seamlessly, as it has been developed to optimize performance under different conditions – for example, for a workforce with different skills.
  • When foreign governments subsidize their firms, the American companies that compete with them are hurt. But, American consumers enjoy lower import prices, leaving Americans as a whole better off. There are exceptions, though. Foreign improvements in military technology could be detrimental to the United States. In addition, there is a difference between government policies that stimulate domestic innovation and policies that encourage or facilitate the forcible acquisition of technology developed abroad. The benign view of technology transfer does not extend to industrial espionage. If the fruits of innovation are stolen, firms will lose their incentive to innovate, reducing domestic and possibly world economic growth.

What this Means:

Firms compete with both domestic and foreign rivals in a high-stakes innovation race that produces winners and losers. But the construct that countries are in an economic competition sets up a false notion and implies that one country's economic advancement necessarily hurts others. World innovation, and hence U.S. growth, will be higher the more scientists, engineers and other innovators are at work. However, the beneficial nature of innovation abroad does not mean that the United States should simply free ride on the innovation of others. The United States’ economic growth is determined principally by domestic factors including domestic innovation. The United States should focus on its personal best performance in the technology race rather than concentrating on whether it is in first place.

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Football, College Party Culture, and Sexual Assault

By Jason Lindo, Peter Siminski, and Isaac Swensen·July 19, 2018
Texas A&M University, University of Technology Sydney, and Montana State University

The Issue:

Alcohol is present in a large share of sexual assault incidents at colleges and universities. New research provides evidence of a link between football-associated partying and increases in reports of sexual assault. This research could inform the development of new programs that better address the problem.

The Facts:

  • Surveys show that around one-in-five college women were sexually assaulted during their time as undergraduates. Partying and drinking is implicated in many sexual assaults. One study found that more than half of incapacitated rapes reported by college women occur at parties and that a majority of perpetrators were under the influence of alcohol.
  • Alcohol control policies and other efforts to encourage safer partying have been largely at the periphery of programs that focus on sexual assault prevention on campus. Lack of evidence of a direct causal link between both partying and alcohol consumption and sexual assault rates may have hindered the formation of these programs.
  • Football games, especially at Division I schools, are associated with tailgating and parties among students. We find that football games increase reports of rape for women between the ages of 17 and 24 years by an average of 28 percent. This estimated effect is over and above the number that might be expected based on the day of the week the game is played (usually Saturday) and over and above the elevated number that might be expected based on the time of year the game is played. Although the effect on sexual assault reports tends to be higher in the case of home games, reporting increases even with away games (see chart).

What this Means:

The success of policies targeted towards party culture in reducing sexual assault depends upon the degree to which that culture is responsible for sexual assault — and the extent to which policies can influence that culture. Some universities have begun to implement policies that focus on alcohol and partying in order to address sexual violence. It will be critical for future research to determine whether these programs can reduce the incidence of rape on campus and, if so, which types of programs are most successful.

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AT&T-Time Warner and New Thinking on Vertical Mergers

By Lynne Pepall and Dan Richards·July 17, 2018
Tufts University

The Issue:

The antitrust efforts to block AT&T’s acquisition of Time Warner are particularly consequential because they represent the first time in decades in which the Department of Justice attempted to block a vertical merger.

The Facts:

  • The link between AT&T and Time-Warner is a vertical one combining firms at different levels of the production and distribution chain. Antitrust merger cases usually focus on horizontal mergers where two (or more) firms that directly compete with each other with products that are very similar combine into one company.
  • Early in the history of antitrust, vertical combinations were viewed as potentially anticompetitive as horizontal ones. But official concern over vertical mergers has waned over the past several decades and prosecution of such mergers has been virtually non-existent. This reflects the rise of a consensus articulated powerfully by Robert Bork in The Antitrust Paradox, his influential 1978 book.
  • However, economic analysis has moved on and there are good reasons to recognize that vertical mergers can pose anticompetitive threats. The rise of game theory and a deeper analysis of imperfectly competitive markets — combined with the experience of real-world business people — have provided new insights into how vertical mergers can impact competition and ultimately affect consumers.

What this Means:

There is no doubt that the AT&T-Time-Warner case is complicated. While there are potential efficiencies and consumer benefits, there are also justifiable concerns that the merger could substantially lessen competition both to the harm of consumers and in violation of the antitrust laws. Hopefully, as this case continues to unfurl and if new ones follow, the legal profession and our courts will begin to recognize that the economics of antitrust has changed; that analysis based on imperfect competition and strategic interaction are most relevant to real world cases; and that only a careful assessment of the facts in each case and not a blanket presumption of good or bad will produce good outcomes.

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The Impact of Roe v. Wade on American Fertility

By Phillip B. Levine·July 11, 2018
Wellesley College

The Issue:

President Trump’s nomination of Brett Kavanaugh to replace Anthony Kennedy on the Supreme Court raises legitimate questions about the future of the 1973 Roe v. Wade decision that legalized abortion in the United States. A careful accounting of the potential impact of reversing Roe requires understanding the effects Roe had in the first place. The legalization of abortion reduced births in the U.S., with larger reductions in some regions and demographic groups. As a result, it altered the pattern of living circumstances and subsequent life outcomes of the population of children born after abortion became legal.

The Facts:

  • Before the Roe v. Wade decision, abortion had already been legalized three years earlier in New York, Washington, Alaska, and Hawaii through legislation, and in California abortions were legal as a result of a state Supreme Court decision.
  • My research compared patterns in birth rates across the states that legalized abortion early relative to those that legalized via the Roe decision to estimate the impact of the policy change on births. Differences in birth rates between those two groups of states were relatively stable in the 1960s, when abortion was largely illegal in the entire country (see chart). In 1971, however, birth rates dropped by around 5 percent in those five states that had legalized abortion relative to the other states. In 1974, after the Roe decision was handed down, that difference was reversed -- as birth rates fell in states where abortion had just become legal -- and then it stabilized once again. Based on these calculations, we estimate that roughly 125,000 fewer births occurred annually because of the Roe decision.
  • Births to teens and to black women fell by around 12 percent. Births to women between 35 and 44 fell at a rate twice the national average and the impact on unmarried women was twice as great as it was for married women. Births among women living in states near those that offered legal abortions declined much less in response to Roe because, in effect, many of them already had access to legal abortion via travel.
  • Evidence shows that those children who were not born as a result of abortion legalization in the early 1970s would have been more likely to die as an infant, grow up in a lower income, single parent household, or receive public assistance. When those children grew up, they would have acquired less education and been more likely to receive welfare and be single parents.
  • The world is a different place than it was 45 years ago, and this makes it difficult to draw sharp parallels with past experience. For instance, long-acting contraception did not exist and it is now becoming more popular. Air travel is also much cheaper (after adjusting for inflation) than it was in the era of a regulated airline industry.

What this Means:

Our nation’s experience with the legalization of abortion almost 50 years ago provides insight into what we might expect to happen if Roe v. Wade were reversed and states were allowed to set their own abortion policies. The more states that keep abortion legal, the smaller would be the impact on births. If many states outlaw abortion, previous experience would indicate that, over time, as many as tens of thousands of children might be born who otherwise wouldn’t be. If the patterns that were present in the 1970s when Roe v. Wade legalized abortion at the national level continue to hold, those children are more likely to be born to unmarried women, teens, older women, and black women. They will have different living circumstances in childhood and later life outcomes compared to those children who will be born regardless of the policy change.

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Can Employment-Focused Programs Reduce Reincarceration Rates?

By Jennifer Doleac·June 29, 2018
Texas A&M University

The Issue:

Two-thirds of those released from prison are arrested again within three years. Those who are employed are less likely to reoffend, and this correlation has led many to think that increasing access to jobs could be the key to reducing recidivism.

The Facts:

  • Studies have found that individuals are less likely to reoffend if they happen to be released at a time when the local low-skilled labor market is strong and when well-paying entry-level jobs are available.
  • People with criminal records may need help overcoming obstacles to employment. One approach is through transitional job programs, which provide temporary, subsidized employment that is designed to transition hard-to-employ individuals (including people with criminal records) into private sector employment.
  • However, a number of large randomized controlled trials have measured the effects of transitional job programs on subsequent employment and recidivism, and the results have been disappointing.
  • How do we reconcile these results with the research showing that being released during a strong low-skilled labor market reduces recidivism? A key takeaway of those studies is that access to good jobs — not just any jobs — reduces recidivism.

What this Means:

Strong low-skilled labor markets appear to reduce recidivism, but several studies show that simply giving people a job through a transitional jobs program is ineffective. It appears to be difficult to mimic the power of strong labor demand through targeted interventions. Moving forward, it may be helpful to look beyond employment. Individuals who cycle through the criminal justice system have many needs that limit their work-readiness and drive continued criminal activity. Focusing interventions on those other needs, such as substance abuse treatment, mental health treatment, or housing, could be more successful.

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