Matthew Notowidigdo

REVISION: Salience and Taxation with Imperfect Competition
Date Posted:Thu, 11 Aug 2022 10:10:37 -0500
This paper studies commodity taxation in a model featuring heterogeneous consumers, imperfect competition, and tax salience. We derive new formulas for the incidence and marginal excess burden of commodity taxation, and we find that tax salience and market structure interact when considering tax incidence and the marginal excess burden. We estimate the necessary inputs to the formulas by combining Nielsen Retail Scanner data from grocery stores in the US with detailed sales tax data. We calibrate our new formulas and conclude that essentially all of the incidence of sales taxes falls on consumers, and the marginal excess burden of taxation is larger than estimates based on standard formulas that ignore imperfect competition and tax salience.

New: The Economic Consequences of Bankruptcy Reform
Date Posted:Thu, 19 Nov 2020 10:26:37 -0600
A more generous consumer bankruptcy system provides greater insurance against financial risks but may also raise the cost of credit. We study this trade-off using the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), which increased the costs of filing for bankruptcy. We identify the effects of BAPCPA on borrowing costs using variation in the effects of the reform across credit scores. We find that a one-percentage-point reduction in bankruptcy-filing risk decreased credit-card interest rates by 70{90 basis points. Conversely, BAPCPA reduced the insurance value of bankruptcy, with uninsured hospitalizations 70 percent less likely to obtain bankruptcy relief after the reform.

REVISION: Who Profits from Amateurism? Rent-Sharing in Modern College Sports
Date Posted:Thu, 01 Oct 2020 03:54:54 -0500
Intercollegiate amateur athletics in the US largely bars student-athletes from sharing in any of the profits generated by their participation, which creates substantial economic rents for universities. These rents are primarily generated by men’s football and men’s basketball programs. We characterize these economic rents using comprehensive revenue and expenses data for college athletic departments between 2006 and 2019, and we estimate rent-sharing elasticities to measure how rents flow to women’s sports and other men’s sports and lead to increased spending on facilities, coaches’ salaries, and other athletic department personnel. Using complete roster data for every student-athlete playing sports at these schools in 2018, we find that the rent-sharing effectively transfers resources away from students who are more likely to be black and more likely to come from poor neighborhoods towards students who are more likely to be white and come from higher-income neighborhoods. To ...

New: Temporary Unemployment and Labor Market Dynamics During the COVID-19 Recession
Date Posted:Wed, 30 Sep 2020 11:34:40 -0500
This paper develops a search-and-matching model that incorporates temporary unemployment and applies the model to study the labor market dynamics of the COVID-19 recession in the US. We calibrate the model using panel data from the Current Population Survey for 2001-2019, and we find that the model-based job finding rates match observed job finding rates during the entire sample period and out-of-sample up through July 2020. We also find that the Beveridge curve is well-behaved and displays little change in market tightness in 2020 once we use the calibrated model to adjust for changes in the composition of the unemployed. We then use the model to project the path of unemployment over the next 18 months. Under a range of assumptions about job losses and labor demand, our model predicts a more rapid recovery compared to a model that does not distinguish between temporary and permanent unemployment and compared to professional and academic forecasts. We find that in order to ...

REVISION: Who Profits from Amateurism? Rent-Sharing in Modern College Sports
Date Posted:Fri, 04 Sep 2020 06:02:27 -0500
Intercollegiate amateur athletics in the US largely bars student-athletes from sharing in any of the profits generated by their participation, which creates substantial economic rents for universities. These rents are primarily generated by men’s football and men’s basketball programs. We characterize these economic rents using comprehensive revenue and expenses data for college athletic departments between 2006 and 2019, and we estimate rent-sharing elasticities to measure how rents flow to women’s sports and other men’s sports and lead to increased spending on facilities, coaches’ salaries, and other athletic department personnel. Using complete roster data for every student-athlete playing sports at these schools in 2018, we find that the rent-sharing effectively transfers resources away from students who are more likely to be black and more likely to come from poor neighborhoods towards students who are more likely to be white and come from higher-income neighborhoods. To ...

New: What Does (Formal) Health Insurance Do, and for Whom?
Date Posted:Sat, 27 Jan 2018 10:52:57 -0600
Health insurance confers benefits to the previously uninsured, including improvements in health, reductions in out-of-pocket spending, and reduced medical debt. But because the nominally uninsured pay only a small share of their medical expenses, health insurance also provides substantial transfers to non-recipients (those parties who would otherwise bear the costs of providing uncompensated care to the uninsured). These facts help explain the limited take-up of heavily-subsidized public health insurance, as well as estimates that show that for many recipients the value of formal health insurance coverage is substantially less than the cost to the insurers of providing that coverage. The distributional implications of public subsidies for health insurance depend critically on the ultimate economic incidence of the transfers they deliver to providers of uncompensated care.

New: Manufacturing Decline, Housing Booms, and Non-Employment
Date Posted:Tue, 04 Jun 2013 14:50:34 -0500
We exploit cross-city variation in manufacturing decline and housing market changes during the 2000s, and jointly estimate their effects on non-employment. Both forces strongly affected non- employment between 2000 and 2007, with the increase from manufacturing decline almost exactly offset by reductions attributable to housing. We show that this offsetting occurred both in the aggregate and at the individual level. Moreover, we show that the housing bust undid the effects of the preceding ...

New: Duration Dependence and Labor Market Conditions: Evidence from a Field Experiment
Date Posted:Tue, 04 Jun 2013 13:32:04 -0500
This paper studies the role of employer behavior in generating “negative duration dependence” - the adverse effect of a longer unemployment spell - by sending fictitious resumes to real job postings in 100 U.S. cities. Our results indicate that the likelihood of receiving a callback for an interview significantly decreases with the length of a worker’s unemployment spell, with the majority of this decline occurring during the first eight months. We explore how this effect varies with ...

REVISION: Liquidity Constraints and Consumer Bankruptcy: Evidence from Tax Rebates
Date Posted:Thu, 10 May 2012 10:43:44 -0500
This paper estimates the extent to which legal fees prevent liquidity-constrained households from declaring bankruptcy. To do so, it studies how the 2001 and 2008 income tax rebates affected consumer bankruptcy filings. We exploit the randomized timing of the rebate checks and estimate that the rebates caused a significant, short-run increase in consumer bankruptcies in both years, with larger effects in 2008 when the rebates were more generous and more widely distributed. Using ...

REVISION: Liquidity Constraints and Consumer Bankruptcy: Evidence from Tax Rebates
Date Posted:Sun, 15 Jan 2012 13:16:35 -0600
This paper estimates the extent to which legal fees prevent liquidity-constrained households from declaring bankruptcy. To do so, it studies how the 2001 and 2008 income tax rebates affected consumer bankruptcy filings. We exploit the randomized timing of the rebate checks and estimate that the rebates caused a significant, short-run increase in consumer bankruptcies in both years, with larger effects in 2008 when the rebates were more generous and more widely distributed. Using ...

New: What Good is Wealth Without Health? The Effect of Health on the Marginal Utility of Consumption
Date Posted:Tue, 14 Jul 2009 02:34:45 -0500
We estimate how the marginal utility of consumption varies with health. To do so, we develop a simple model in which the impact of health on the marginal utility of consumption can be estimated from data on permanent income, health, and utility proxies. We estimate the model using the Health and Retirement Study’s panel data on the elderly and near-elderly, and proxy for utility with measures of subjective well-being. We find robust evidence that the marginal utility of consumption declines as ...

New: Income and Health Spending: Evidence from Oil Price Shocks
Date Posted:Tue, 19 May 2009 07:20:27 -0500
Health expenditures as a share of GDP have more than tripled over the last half century. A common conjecture is that this is primarily a consequence of rising real per capita income, which more than doubled over the same period. We investigate this hypothesis empirically by instrumenting for local area income with time-series variation in global oil prices between 1970 and 1990 interacted with cross-sectional variation in the oil reserves across different areas of the Southern United States ...

New: Income and Health Spending: Evidence from Oil Price Shocks
Date Posted:Tue, 24 Feb 2009 23:19:15 -0600
Health expenditures as a share of GDP have more than tripled over the last half century. A common conjecture is that this is primarily a consequence of rising real per capita income, which more than doubled over the same period. We investigate this hypothesis empirically by instrumenting for local area income with time-series variation in global oil prices between 1970 and 1990 interacted with cross-sectional variation in the oil reserves across different areas of the Southern United States ...

New: Approaches to Estimating the Health State Dependence of the Utility Function
Date Posted:Mon, 19 Jan 2009 05:55:09 -0600
If the marginal utility of consumption depends on health status, this will affect the economic analysis of a number of central problems in public finance, including the optimal structure of health insurance and optimal life cycle savings. In this paper, we describe the promises and challenges of various approaches to estimating the effect of health on the marginal utility of consumption. Our basic conclusion is that while none of these approaches is a panacea, many offer the potential to shed ...

New: Approaches to Estimating the Health State Dependence of the Utility Function
Date Posted:Wed, 14 Jan 2009 06:40:47 -0600
If the marginal utility of consumption depends on health status, this will affect the economic analysis of a number of central problems in public finance, including the optimal structure of health insurance and optimal life cycle savings. In this paper, we describe the promises and challenges of various approaches to estimating the effect of health on the marginal utility of consumption. Our basic conclusion is that while none of these approaches is a panacea, many offer the potential to shed ...

New: Peer Effects in the Workplace: Evidence from Random Groupings in Professional Golf Tournaments
Date Posted:Mon, 12 Nov 2007 01:25:38 -0600
This paper uses the random assignment of playing partners in professional golf tournaments to test for peer effects in the workplace. We find no evidence that the ability of playing partners affects the performance of professional golfers, contrary to recent evidence on peer effects in the workplace from laboratory experiments, grocery scanners, and soft-fruit pickers. In our preferred specification, we can rule out peer effects larger than 0.045 strokes for a one stroke increase in playing ...