Professor Ohanian’s podcast on California homelessness
UCLA Professor Lee Ohanian discusses homelessness and housing problems in his podcast for California Sun.
The podcast can be found here.
The Long-Term Consequences of Slum Clearance on Children
By Fernanda Rojas Ampuero
Fernanda Rojas Ampuero
More than 25% of the world’s urban population today live in slums (UN-Habitat, 2020). A common policy response to high poverty and the large share of slum dwellers in developing countries has been to provide low-income housing in city peripheries and suburban areas. However, it is unclear whether these policies benefit recipients: Despite the improvement in housing quality, families lose in terms of proximity to jobs, social networks, and access to public goods, such as schools and health provision. There is little evidence on how moving to peripheral neighborhoods, rather than upgraded housing on site, affects the long-run outcomes of residents and their children.
In the paper titled “Sent Away: The Long-Term Effects of Slum Clearance on Children,” Fernanda Rojas Ampuero (former UCLA PhD student, current post-doc at Harvard) and Felipe Carrera (Reed College), study the long-term effects of moving to a high-poverty neighborhood on the earnings and schooling of children. To do so, they examine the impacts of a large-scale slum clearance and urban renewal program, the Program for Urban Marginality, that was implemented during the Chilean dictatorship between 1979 and 1985.
The program made all the slum dwellers become homeowners, but whereas some slums were upgraded into neighborhoods (non-displaced), other slum dwellers were forcedly relocated to suburban areas (displaced). The authors use this variation between types of intervention to estimate the effects of the forced displacement on children’s outcomes. To empirically estimate the effects, they combine archival records and administrative data.
The authors find negative effects for children aged 0 to 18: Compared with the non-displaced, displaced children earned on average 10% less per month over their life. This negative effect is not associated with lower employment but with the quality of employment: Displaced children were more likely to work in temporary jobs and without a formal contract. In addition, displacement reduced children’s educational attainment: A displaced child lost 0.5 years of education and was 12% less likely to graduate from high school relative to a non-displaced child.
What explains these results? Almost 70% of the variation on children’s adult labor earnings can be explain by the characteristics of the municipalities of destination. The authors find evidence that lower social cohesion, measured as neighborhood fragmentation, reduced children’s schooling. In addition, their adult labor earnings were also affected by worse labor market access, measured as access to public transportation at the time of the intervention.
This paper contributes to the literature on neighborhood effects, with the novelty that it is the first to look at a developing country and long-term outcomes. Although families received a new housing unit, the results of this paper document that forcing families to live in peripheral and low-quality neighborhoods has long-term negative consequences, and it sheds light on which aspects of neighborhoods matter.
Former PhD Student Jingyi Huang Awarded the Allan Nevins Prize for Best Dissertation
Former UCLA economics PhD student Jingyi Huang has been awarded the Allan Nevins Prize for the best dissertation in U.S. economic history from the Economic History Association. This prize is a notable recognition of Huang’s work and puts her on the path of major contribution to the field for years to come.
After completion of her PhD in economics at UCLA in 2021, Jingyi Huang was a postdoc at Harvard for the 2021-2022 school year and is now an assistant professor at Brandeis University.
More information about the Economics History Association can be found here.
Previous winners of the award can be found here.
PhD Student Giovanni Righi Awarded Doctoral Grant from the Washington Center for Equitable Growth
PhD student Giovanni Righi has been awarded a doctoral grant for 2022-2023 from the Washington Center for Equitable Growth.
More information about the grant can be found here.
Oleg Itshokhi in Business Insider
UCLA Professor Oleg Itskhoki makes a cameo appearance in the Business Insider article “Fewer Chinese Students May Hurt the US Economy.”
The article can be found here.
Michael Rubens Named Young Economists´ Essay Award Winner by EARIE
Michael Rubens won the 2022 Young Economists´ Essay Award Winner presented by the European Association for Research in Industrial Economics (EARIE).
The Young Economists´ Essay Award is awarded annually to 3 authors under the age of 35, who are less than 5 years from their PhD defense, during EARIE’s annual conference.
More information about the award and EARIE can be found here.
Bloomberg Interview with Clark Medal Winner Oleg Itskhoki
On August 2, 2022, Bloomberg interviewed UCLA Professor and recent Clark Medal winner Oleg Itskhoki.
The full interview can be read here.
The Economic Cost of OPEC’s Control of Global Oil
John Asker
By John Asker
OPEC, the global cartel of oil producing countries, led by Saudi Arabia and other Gulf states, controls approximately 50% of the world’s oil reserves. In (Mis)Allocation, Market Power and Global Oil Extraction (American Economic Review, 109(4), 1568-1615, 2019) and The Welfare Impact of Market Power: The OPEC Cartel (work in progress) Professor John Asker and coauthors examine the impact of OPEC’s market power in the modern era. Using detailed data on almost every known oil field in the world they build a detailed model of the cost structure underlying the world crude oil market. They use this model, combined with an economic theory of market equilibrium, to examine what the world market for crude oil would look like absent OPEC’s coordinating influence.
As one would expect, OPEC has a large impact on the world oil markets. That said, the magnitude of OPEC impact is startling. Between 1970 and 2014, Professor Asker’s research indicates that OPEC imposed a total economic cost of 5.7 trillion US dollars. For comparison, the comparable value of global output (GDP) in a single year is 77 trillion US dollars. If a typical recession is associated with a 3% drop in GDP, OPEC’s exercise of market power since 1970 has imposed an economic cost equivalent to one 2.5-year global recession.
The economic cost of this exercise of market power comes from two sources. First, when production from low-cost oil fields is reduced, higher cost fields substitute for at least some of that production. This imposes an economic cost through increasing the resource cost of existing production. Second, when market power is wielded, prices increase due to insufficient supply being delivered to meet demand. This means gains from trade can be unrealized (consumers have unmet demand despite their willingness to pay being higher than the cost of supplying them). About 85% of the economic costs of OPEC activity is estimated to come from gains from trade that are not realized due to OPECs desire to distort prices above competitive levels.
This work sheds light on the operation of the global oil market – which is economically significant in itself – but also underscores the macroeconomic impact of the exercise of market power generally. This contributes to an ongoing re-evaluation within economics of the role of microeconomic market imperfections (like market power) on aggregate economic outcomes. OPEC influence over the global crude market is a compelling example of how the accumulation of market power in globally significant markets can impose economic costs on society that reach macroeconomic significance.
