Friday, August 29, 2008

Cash For School Performance in DC

I’m back in DC after spending the summer in California. To get ready for my return to DC/Baltimore I have been watching the fifth season of the Wire, I still have a few disks to go so don’t ruin the ending for me.

In the fifth season Baltimore mayor Tony Carcetti spends a lot of time worrying about Baltimore City schools test scores. One tool he never tried was paying students to do better on tests. This type of program has become popular recently in Latin America paying households cash on the condition that they attend school. On my recent trip to rural Oaxaca most families received government funds and now almost all children completely through 8th grade.

In the US the problems are slightly different. You can get the kids to go to school, but improving tests scores is harder. Last March I discussed how New York City is trying a program that pays students if they keep regular attendance, turn in homework, and pass state tests.

Now that program is coming to DC. Along with a randomized trial (students in 14 schools will receive money and will be compared with 14 similar schools in a control group that won’t) Also like NYC Ronald Fryer, Harvard Economist, will be doing the analysis.

I look forward to seeing the results.

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Wednesday, August 27, 2008

Short and Long Run Responses to Price Changes

Last fall, South Dakota businessman Steve Polley was scouting for ways to make some extra income when he saw a news headline: The price of hops was surging because of a global shortage.

From a recent Wall Street journal article on hops (the stuff that makes beer bitter and tasty).

When the price of an agricultural good goes up and there are profits to be made by selling it, people like Steve Polley, will try to start producing more. However, if you plant hops it takes several years to produce any. So if the demand for hops goes up because people like to drink beers like 60 minute IPA or Hops Slam, the price of hops in the short run is likely to surge up.
But after a few years all those farmers who planted additional hops start seeing yields. The price of hops will start to fall back after a few years (the long run). Or as the article put it

Some hops experts are skeptical about the prospects of the new growers. Ralph Olson, owner of Hopunion CBS LLC, a broker of hops, predicts many nascent growers won't be in business in a few years. Prices will come down, and insects can wreak havoc, he warns. Hops "are tough," he says. "The economics aren't there."

Same story can be told about coffee or oil. It takes a few years to adjust to a change in prices.
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Monday, August 25, 2008

Shameless Self Promotion: Work on Minor League Baseball

My Towson colleague, Tom Rhoads, and I recently wrote a paper on minor league baseball attendance. Looking at the impact of winning, homeruns, and major league prices.

Along with some great data from we also used information on the cost of going to a major league game from Team Marking Report. You might be familiar with their average cost of a family of 4 going to a major league baseball game each year.

Jon Greenberg, from Team Marketing Report, wrote up a nice profile of our work.

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What are Economists Good For?

When I tell people I’m an economics professor, I usually get one of two reactions.

1.The econ class I took in college was really boring, hard, or yuck! (Occasionally it is positive)
2.What do you think is going to happen with the stock market, price of oil, or housing prices?

Scott Adams, the man behind Dilbert, offers up his view of what economists are good for.
“…if an economist tries to tell you where the stock market will be in a year, you can safely ignore that. But if he tells you a gas tax holiday is an unambiguously bad idea, that's worth listening to, especially if economists on both sides of the aisle agree.”

So ironically, we are asked most about what we cannot give a good answered for, but ignored when we can give a good one.

At least I don’t have to hear the same lawyer joke over and over again.

Also, I wonder what people ask proctologists.

h/t to Newmark’s door
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Friday, August 22, 2008

One Child Policy, Sex Ratio and Crime in China

Over on, Esther Duflo has a very readable piece on the potential rise in crime caused by gender selection as a result of China’s one child policy. As Duflo points out there are nearly 110 young males (age 15-25) for every 100 young women. As the only child generation has reached adulthood, crime rates have increased over 13%.

Duflo cites a recent study by Chinese and American researchers: “Sex ratio and crime: Evidence from China’s one-Child Policy” (by Edlund, Li, Yi, and Zhang). The study compares regions that had different rates of enforcement of the one-child policy, which led to differences in the male to female sex ratio. Overall, Duflo says that the increase explains about 1/7 (2% ish) of the increase.

I went to look at the paper and the abstract posted (here) says that crime had increased 5-6% from the change in sex ratio. Even though the downloadable working paper (here) is more in line with the 2-3% number Duflo cites?

A couple of questions arise though. What is the impact of 3-6% rise in the crime rate? Could this impact China’s economic growth prospects, particularly since the ratio is now 120 boys to 100 girls?

My solution to the problem. Bring more Chinese males to American Universities (see here). (OK that won't work either).

How about paying households who have girls in China?

h/t to Chris Blattman
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Thursday, August 21, 2008

Paying Me Not to Park Part II: Stanford Does It

Last week, I wrote about the possibility of Towson, my University, to pay me not to park. The idea being that the school subsidizes faculty and student parking, so if they could get me not to purchase a parking pass by paying me the school could save money (of course they could raise parking fees too).

I thought this suggestion was a little crazy, but it is just crazy enough for Stanford University! The program is detailed in Stanford’s alumni magazine here. Stanford offers faculty and students $216 a piece last year ($282 this year) not to purchase a parking pass. Plus those who join the program also get a chance at valuable prizes.

The results are impressive from the article “The percentage that drive to work alone has dropped from 72 percent in 2002 (before the program) to 52 percent in 2007.”

One problem might be that you want to drive to work occasionally, so Stanford allows the non-commuters to purchase day passes.

Another concern is that an emergency might occur (sick kid, house is on fire, or you forgot your lecture notes). Stanford has that covered with an emergency ride program. More specifics found here.

I have been spending the summer at Stanford, but not as official employee. I’m riding my bike to work and have not parked on campus all summer. Can I have my check now?

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Wednesday, August 20, 2008

How to Increase Housing Prices? Import Buyers

One way to look at the current housing crisis is that we have built too many homes. Another way to look at it is we don’t have enough buyers. So how do we get more buyers, Alan Greenspan suggests increase quotas for skilled immigrants. Excerpted from a Wall Street Journal interview

"The most effective initiative, though politically difficult, would be a
major expansion in quotas for skilled immigrants," he (Greenspan) said. The only
sustainable way to increase demand for vacant houses is to spur the formation of
new households. Admitting more skilled immigrants, who tend to earn enough to
buy homes, would accomplish that while paying other dividends to the U.S.

He estimates the number of new households in the U.S. currently is
increasing at an annual rate of about 800,000, of whom about one third are
immigrants. "Perhaps 150,000 of those are loosely classified as skilled," he
said. "A double or tripling of this number would markedly accelerate the
absorption of unsold housing inventory for sale -- and hence help stabilize

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Tuesday, August 19, 2008

Convenience Fees, Not So Convenient to the Baseball Fan

Chris Jaffe has posted his second annual review of “convenience” and “order processing” charges of major league baseball teams. The previous installment was called “The $17 ticket that cost $25” describes these charges, where when you try to purchase a $17 ticket online you find $10 worth of additional charges to print your own tickets at home. These extra costs can be avoided by buying tickets at the gate.

The charges range $11.25 for the Red Sox to $2.00 to the Brewers. So what is the economics behind these charges? Let’s go to the supply and demand curves.

We can basically ignore the supply curve. The local MLB team is a monopoly (or close). Plus the additional cost of selling one extra ticket online is close to zero. All teams likely pay the same to Ticketmaster to receive the tech support to sell tickets online, so demand is driving the price differences between teams.

So why is Red Sox Nation paying 5 times as much as the Brew Crew? Well, these charges can be avoided by purchasing the tickets at the stadium on the day of the game, but the Red Sox are selling out basically every game so the convenience fee is actually a way to charge a higher price to guarantee tickets.

But, the Brewers are also selling out games this year and their $2 charge is half of the Texas Rangers the next lowest team. So the Brewers are a bit of an outlier. But generally, teams that did better last year had higher convenience charges. See the chart to the side. A regression analysis shows for each extra game a team won in 2007 that their 2008 convenience charge was 5 cents higher (P-value = .11). This should not surprise us since better teams are more likely to sell out and people pay the convenience charge to avoid not getting tickets.

But why are the Brewers at outlier? I’ll e-mail them and see.

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Monday, August 18, 2008

Deadwood and Land Tenure

My wife and I were recently re-watching Deadwood, an HBO series that takes place in a post civil war Dakota gold mining town. A major plot point of the show is how Deadwood might eventually be incorporated into the United States as it was in unclaimed territory. The hope of the local business leaders is that their current claims to both mining rights and down town land will be recognized once the territory was brought into the union.

To develop businesses or mine claims, the prospectors need guarantee of title. In one of the first episodes, Al Swearengen a local leader sells a plot of land to Seth Bullock and Sol Starr so they can build a hardware store. Yet, Deadwood is in an unclaimed territory and has no clear way to enforce the title to the land. I guess Swearengen’s backing is enough to give confidence that the improvements made on the land will be upheld.

Through a system of enforceable property rights Deadwood was able to develop into a sizeable mining town. Yet, many countries still lack a means for enforceable property rights. In my visits to rural Mexico, it seemed that many farms did not have title to their land and although they could be reasonable sure no one would steal it, it was difficult to sell. The lack of the ability to sell land or use it as collateral has been pointed to as one of the causes of underdevelopment in many countries.
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Wednesday, August 13, 2008

The Economics of Parking Policy: Pay Me not To Park

There is an old saying that it is the job of the college president to make sure the students can have sex, the faculty can park, and the alumni have a winning football team. Let’s look at faculty parking. Today I got a news story about Towson’s new program to give a 50% discount on parking passes to hybrid drivers. I’m probably going to purchase a new used car within the next year, the saving of $350 a year makes a hybrid a lot more attractive of a purchase.

If you just did some quick math you realized I pay $700 a year for parking at Towson. Not all faculty pay this rate as it is in part determined by income, but I would guess most pay at least $300-$400 a year. Interestingly I never realized until the reading the article that it was not me subsidizing the lower paid faculty members, but Towson who is subsidizing me less. From the article Pam Mooney the direct of parking states “To provide a parking space costs between $2,000 and $3,000 per year per person versus $200 to $300 if a person takes the bus instead of driving.” That means Towson is spending between $1300 and $2300 a year to provide me a parking space.

So here is what I propose as a solution. If you do not purchase a parking pass you get paid equivalent of the cost of your parking pass. Faculty could work out car pooling, biking, public transportation, hiring a car service on their own. If Towson pays me $700 extra dollars for not buying a parking pass, then it saves $600-$1600 in subsidies for parking.

Next year I plan on purchasing a house a large swing in the benefit of not parking on campus, could be just the incentive I need to make sure it is close enough to bike.
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Tuesday, August 12, 2008

Coffee Talk: Thoughts from Mexico

So I just got back from a quick trip to visit some coffee farms in the rural areas of Oaxaca Mexico. All of the farmers I spoke with grew organic shade grown coffee. They were proud of the organic ideals and believed in them. I’m not a biologist, but when they say shade grown they mean it. A thick overhang of tasty banana and orange trees covers the coffee trees, which seem like a natural part of the landscape. This is a stark difference between the coffee fields I saw in Costa Rica and Honduras on previous trips with rows of coffee trees uncovered or under a couple of banana trees.

Even with fair trade prices received by farmers, about a $1 a pound it is tough to make much from coffee farming. The typical person I talked to received somewhere between $500 and $1,000 in revenue for their small 1-3 hectare farm. Organic coffee farming is a lot of work, requiring a lot weeding and pruning. Although many also grew their own corn, a few had other jobs, and many received remittances from US relatives.

Now back to the fair trade part. The price received by farmers outside of the fair trade cooperative was almost the same as those not in organizations this year. In that sense there was not much of a premium this year.

The question I’m interested in is how do the young people (ages 14-30) in these rural villages decide between going to high school, migrating, and staying. I get the sense that most people would like stay if there was a good job, but when the village is 5 hours to Oaxaca City and a small farm produces only a $1,000 worth of crops it is difficult choice.

As the work progresses, I’ll keep you informed.

Until then there is a whole lot of coffee to be drunk before this paper is finished.
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Friday, August 1, 2008

Off to Mexico!

On Sunday I leave for Mexico for a week. So it is unlikely there will be any blog updates.

The trip is part of a new research project I'm working on regarding fair trade coffee. Luckily I already have access to some good data, but I don't really have a sense of the fair trade coffee market in Mexico.

In previous research I have found that farming coffee in Honduras and Nicaragua was associated with lower levels of education. Is the high price of fair trade sufficient to provide income so parents can send their children to school or is it so high that children want to work on the coffee farm instead of attend school.

At the same time, Mexico has a large conditional cash transfer program that pays households if they send children to school through middle school.

Lots of other issues including migration to explore. Hopefully my trip will give me a better sense of the realities before I get too close to the data.
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