The research of the NU Department of Economics presented at the 2021 AEA Annual Meeting is highlighted here.

Trade-offs? The Impact of WTO Accession on Intimate Partner Violence in Cambodia

Bilge Erten, Northeastern University; Pinar Keskin, Wellesley College

Abstract: We study the impact of trade-induced changes in labor market conditions on violence within the household. We exploit the local labor demand shocks generated by Cambodia’s WTO accession to test how shifts in the relative employment of women compared to men affected the risk of intimate partner violence. We document that men in districts facing larger tariff reductions experienced a significant decline in employment. These trade-induced job losses generated an added worker effect, as women entered the labor force. The increase in women’s employment triggered backlash effects by increasing intimate partner violence, without changes in marriage, fertility, or psychological wellbeing.

Endogenous Maverick Behavior: A Model

John E. Kwoka, Northeastern University; Birzhan Batkeyev, Kazakh-British Technical University; David Hummel, Northeastern University

Abstract: So-called maverick firms have long been singled out in industry analysis and in antitrust matters due to their uniquely “disruptive role in the market,” in the words of the U.S. Merger Guidelines. Economic analyses typically cite unique discount factors or business strategies as sources of such behavior, but these fail to explain what causes a firm with such characteristics to adopt maverick as opposed to more cooperative behavior. They therefore cannot predict whether maverick behavior is immutable or might change under different circumstances.

This paper provides a model in which maverick behavior emerges as the profit-maximizing strategy under certain observable and plausible circumstances. The model assumes a dominant incumbent firm and an initially small, lower-cost, and capacity-constrained rival producing a homogeneous product in Stackelberg-like price competition. After the rival sells its entire capacity, the dominant firm maximizes profit under its residual demand. We show that the small rival initially earns greater profit by this strategy than by cooperating with the dominant firm, but as that rival expands, its profitability falls relative to its profit from coordinating with the dominant firm. We solve for the critical values of the maverick’s size (and similarly, its cost advantage), past which it optimally chooses to cooperate.

Despite some special features, this model appears to be the first to demonstrate how maverick behavior emerges endogenously and to offer observable correlates of that behavior. The paper concludes with some observations about a prominent example of a maverick firm–Southwest Airlines–and some implications for competition policy.

No Longer Qualified? Changes in the Supply and Demand for Skills within Occupations

Alicia Modestino, Northeastern University; Mary Burke, Federal Reserve Bank of Boston; Shahriar Sadighi, Amazon; Rachel Sederberg, Burning Glass Technologies; Bledi Taska, Burning Glass Technologies

Abstract: Prior research has established that US employers increased education requirements within occupations for open positions during the Great Recession, a trend that became known as “upskilling” (Modestino, Shoag, and Ballance, 2020). Although roughly one-third of the upskilling that occurred during the Great Recession was cyclical (Modestino, Shoag, and Ballance 2016), as much as two-thirds of the increase appears to have been more persistent or structural (Hershbein and Kahn 2018). As a result, unemployed workers in some occupations may no longer qualify for the positions they once held if they lack the necessary educational credentials to meet these new hiring requirements.

Using a novel database of 159 million online job postings, we examine movements in employer skill requirements for education and specific skill sets between 2007 and 2017. We find that occupations in the high-skill sector—jobs that as of 2006 were mainly held by individuals with at least a college degree—were more likely to have increased education requirements during the Great Recession, and maintained those higher requirements between 2010 and 2017 as the labor market generally improved. In contrast, occupations in the middle- and low-skill sectors largely engaged in temporary upskilling, posting higher education requirements during the recession, but then reverting to less stringent requirements between 2010 and 2017. We also show that persistent upskilling among the high-skill sector appears to be driven by the demand for software skills as opposed to other baseline or specialized skills.

Finally, constructing mismatch indexes by skill sector reveals that mismatch increased across all sectors between 2007 and 2010, but continued to increase between 2010 and 2017 in the high-skill sector while receding in the low- and middle-skill sectors. Our findings suggest that structural trends in employer upskilling are exacerbated during recessions, leading to greater mismatch and slower labor market recovery.

Too Fast, Too Furious? Digital Credit Speed and Repayment Rates

Alfredo Burlando, University of Oregon; Michael Kuhn, University of Oregon; Silvia Prina, Northeastern University

Abstract: Digital loans are a source of fast short-term credit for millions of people. While digital credit broadens market access and reduces frictions, default rates are high. We study the role of speed of delivery of digital loans on repayments. Our study combines unique administrative data from a digital lender in Mexico with a regression-discontinuity design. We show reducing speed by doubling the loan delivery time from ten to twenty hours reduces the likelihood of loan default by 21%. Our finding hints at waiting periods as a potential consumer protection measure for digital credit.

Addressing Societal Externalities to Promote Racial Equality

Madhavi Venkatesan, Northeastern University 

Abstract: Beginning with the religiously legitimized marginalization of African slaves, inclusive of the establishment of the concept of “race” and racial hierarchy through craniometry and Social Darwinism, to the promotion of stereotype based on genetic inferiority, and finally, the endogenization of stereotype through regulation and institutionalized discrimination, this paper highlights the trade-off between morality and economic gain, referenced as societal externalities, in the construction of racial inequality. Societal externalities, the author argues, have affected social construction and social norms both within groups and across groups, with the intergenerational adoption of social norms resulting in implicit racial bias. Using economic theory and selected policy examples, the author discusses the racial bias inherent in economic assumptions and highlights how the exclusion of societal externalities in economic assessments has limited the value of related policy action in curbing racial inequality. The paper concludes with recommendations for incorporating societal externalities in economic evaluation along with the rationale for interdisciplinary collaboration in the development and implementation of policy focused on promoting racial equality.