Tatyana Deryugina (Twitter: @TDeryugina)

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Posted 02 Mar 11 by Tatyana in Musings on Economics

I recently had a debate about unions with someone who knew slightly more about the state of the economic literature on the topic than I did. I know close to nothing about union economics specifically. Nevertheless, I hope that I am qualified to use general economics to shed light on what’s going on in Wisconsin and with public sector unions elsewhere.

The simplest way to think about unions is as having some market (monopoly) power. In other words, they are able to negotiate higher salaries/benefits than if each individual bargained for him or herself. Putting aside the benefits to the unionized and employed workers (which are clearly positive), what can be said about social welfare as a whole?

Posted 24 Feb 11 by Tatyana in Musings on Economics

…me! I have officially confirmed that I will be starting as Assistant Professor at the University of Illinois at Urbana-Champaign next year. The job market was a truly unique and surprisingly fun experience, but I am glad it’s over for many reasons:

  1. I have a great job with great colleagues!
  2. I get to catch up with my classmates and others I haven’t seen in months.
  3. I started running regressions again this week, for the first time since December or so.
  4. Yesterday, I went to the gym for the first time in about a month. It hurt.
  5. I get to eat my own food in my own home. I never thought I’d say this, but by the end of it all, eating out was no longer exciting.
  6. I can focus on this whole graduation business now.

Good luck to everyone who’s still in the process of figuring out where they’ll be next year!

Posted 20 Feb 11 by Tatyana in Musings on Economics

A recent NBER working paper by Morck and Yeung outlines the perils of instrumental variables. In addition to the standard "weak instruments” and "lack of exogeneity” problems, the authors describe a third problem that received much less attention – that of latent variables. Others have written about this issue too, but this happened to be the first paper where I encountered it.

Suppose you use an instrument to identify the causal effect of education on earnings and someone else uses the same instrument to identify the causal effect of education on health. You both get amazing results and submit to the top journal of your choice. What should the journal think?

Well, if there’s no fundamental relationship between health and earnings, you’re both ok. It just happened that education affects both. However, if there is a causal relationship between the two, as there is likely to be, then neither of your analyses is valid. Healthier people probably have higher potential earnings because they are more productive and those who earn more may be healthier because they spend more on their health.  You could try to control for health in the regression of education on earnings or for earnings in the regression of education on health, but then you need another instrument, which may have the same issues. How’s that for dismal?

Posted 09 Feb 11 by Tatyana in Musings on Economics

There’s an interesting article in the Journal of Labor Economics from last month:

"This article examines how the increase in the incarceration of black men and the sex ratio imbalance it induces shape the behavior of young black women. Combining data from the Bureau of Justice Statistics and the Current Population Survey to match male incarceration rates with individual observations over two decades, I show that black male incarceration lowers the odds of black nonmarital teenage fertility while increasing young black women’s school attainment and early employment. These results can account for the sharp bridging of the racial gap over the 1990s for a range of socioeconomic outcomes among females.”

I think only economists could get away with writing something like this in our day and age.

Posted 07 Feb 11 by Tatyana in Musings on Economics

I must have flown at least 15,000 miles in the past two months (counting my flights to CA for the holidays and to Denver). Flying emits huge amounts of carbon dioxide, so I feel as though I single-handedly made an impact on climate change. That may be an exaggeration, but it made me think about how people approach their own climate-change-inducing behavior. I consider myself someone who tries to be environmentally friendly, but I’ve never changed my travel plans to avoid CO2 emissions (I do turn out my lights when I leave!). Here are some things I tell myself:

I’m "small”. My emissions really don’t make a difference.

I’m not really creating extra emissions. My current flight frequencies are temporary and won’t affect flight schedules. Once again, I’m small.

Climate change is going to happen anyway (= no one else is doing anything), so might as well not stress out about it.

All these things are true, yet I’m willing to make small changes that make even less of a difference. Sadly, this experience makes me think that personal voluntary actions are more consistent with cheap warm glow rather than genuine altruism.  Implication – we either need to greatly increase the amount of warm glow possible or create external climate change policies.

Posted 05 Jan 11 by Tatyana in Musings on Economics
 I’m staying in an undisclosed hotel in Denver. When I arrived, there was a door tag on my bed that asked me to "make a green choice”. Specifically, it offered me a $5 voucher to the hotel stores/restaurants for each day I forgo housekeeping services. Being somewhat of an environmentalist and not seeing a huge benefit in clean sheets every day, I went for it. As it turns out, forgoing housekeeping services also means that no one takes out your trash or replenishes your shampoo and toilet paper. In fact, the housekeepers don’t come to your room at all. Not sure what keeping the trash in the (unlined) basket for one more day does for the  planet, but I bet these "green” tags save the hotel a lot of money.  

Posted 06 Nov 10 by Tatyana in Musings on Economics

About two months ago, I registered for the Allied Social Science Associations (ASSA) annual meeting. Yesterday, as I was reviewing my credit card statement, I saw a $10 "cash equivalent transaction fee” and a $1.50 "minimum interest charge”. I always pay my bill in full and on time, so this was really surprising.

My first thought was that the credit card company changed their policies in a devious way without me realizing it. Incensed, I called the credit card company, only to find out that the reason for the charge was an ASSA $18 hotel processing charge. It was submitted by the ASSA as a cash equivalent instead of the normal credit charge, resulting in the transaction fee and subsequent interest. Seriously, ASSA? I thought only consumers were allowed to make mistakes (I assume they didn’t mean for people to get charged with these fees). Most credit card companies have similar policies, so I wonder how many other economists and social scientists will be surprised with these charges.

To give my credit card company credit, they promised to remove the charges after I talked to them. But the 30 minutes I spent figuring this out was definitely a waste to society.

Posted 21 Oct 10 by Tatyana in Musings on Economics
Being on the academic job market so far produces the same feeling in me as riding a Drop Tower, a ride that drops you from a 23-story height.

It took me a long time to get the courage to ride Drop Zone, a Drop Tower in California. While standing in line, I was terrified. I kept thinking, "Why did I voluntarily agree to do this?”. But it was too late to back out at some point – I didn’t want to look like a coward in front of my friends and all the other people in line.

So there you are in this job market "line”. You know it’ll be ok in the end. You know that it’s just a ride and everyone standing in line comes out ok. You see the smiling people around you and imagine that you’re the only one this terrified.

You finally go on the ride. It lifts you up and now you KNOW there’s no getting down without that butterfly feeling in your stomach. All the seats rise at different rates so you don’t know exactly when the drop will begin. You don’t know whether to close your eyes or keep them open. And then it happens – your seat drops from underneath you and the fall begins.

Almost instantaneously, you’re back on the ground. You feel exhilarated. You thank your friends for convincing you to come. And you never want to do it again.

Posted 18 Jul 10 by Tatyana in Musings on Economics
 According to Investopedia’s term of the day, "dismal science”, a term used to describe economics, was coined by Thomas Carlyle. The reason for his use of the term, however, are still debated. The popular explanation is that he was reacting to Malthus’ theory of population growth outstripping food supply growth (and its dismal implications). Another explanation, which I’ve never heard before, is that this term was an attack on John Stuart Mill, an economist who supported equality of races and the emancipation of slaves. A dismal explanation for the origin, if it is true.  

Posted 07 Jul 10 by Tatyana in Musings on Economics

  1. Working is not always the most productive activity in the long run.
  2. Naps are almost always a good idea (see #1).
  3. Surfing the internet is almost never a good idea.
  4. No one will remember your grades after year 2, including you.
  5. Most of the work gets done last minute. Even after you’ve been repeatedly told that most of the work gets done last minute and have desperately tried to avoid this fate.
  6. You will learn a lot, whether you like it or not. And you will not really realize how much you’ve learned until you talk to people who aren’t yet in grad school.

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