David Baqaee awarded NSF Grant

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We’d like to congratulate Assistant Professor David Baqaee for being awarded a National Science Foundation (NSF) grant for his research titled “Macroeconomics as Explicitly Aggregated Microeconomics.” One of the biggest changes in economics in the 21st century is the increasing availability of comprehensive, high quality, micro-level data on households and firms. To utilize all this data meaningfully, we need macroeconomic models with enough flexibility to be able to leverage and organize all this information. However, such models can be so complex that they turn into unworkable black boxes, whereby it becomes difficult to know where the results are coming from, and how sensitively they depend on the assumptions. This project develops data-driven theory which aggregates granular data by combining the flexibility of computational models with the transparency of theoretical ones. The project then applies these theories to newly-available micro datasets to investigate important macroeconomic issues such as productivity, economic growth, trade and inequality.

This project will develop and apply new aggregation results for economies with non-neoclassical production like fixed costs, increasing returns to scale, entry-exit margins, and discontinuities. These are issues that are typically abstracted away from in both the measurement and analysis of national income and growth. This project will extend classical aggregation theorems that allow for non-linearities, distortions, heterogeneous agents, heterogeneous firms, production networks, and international trade further to environments with non-neoclassical, non-convex, and non-continuous production structures. The project will apply the theoretical results to recently available micro-level datasets that can discipline and put structure on the rich range of theoretical possibilities.

This award reflects NSF’s statutory mission and has been deemed worthy of support through evaluation using the Foundation’s intellectual merit and broader impacts review criteria.

Award Details

 

The NSF funds research and education in most fields of science and engineering.  It does this through grants, and cooperative agreements to more than 2,000 colleges, universities, k-12 school systems, businesses, informal science organizations and other research organizations throughout the United States. The Foundation accounts for about one-fourth of federal support to academic institutions for basic research. NSF receives approximately 40,000 proposals each year for research, education and training projects, of which approximately 11,000 are funded. Source

Faculty Research Featured in UCLA Anderson Review

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The UCLA Anderson Review recently published the article, “Google Says to Hire the Best, but Suppose You Can’t?” written by Dee Gill. This article highlights the research currently being done by Simon Board, Moritz Meyer-ter-Vehn, and Tomasz Sadzik on how top companies tend to “hog the best talent” and how this affects other firms. Below is an excerpt of that article.

Google Says to Hire the Best, but Suppose You Can’t?

By Dee Gill

Top companies hog the best talent, adding to their competitive advantage

It’s not often that a human resources guy gains corporate guru status, but former Googler (his term) Lazslo Bock is a notable exception. His 2015 book, Work Rules! Insights from Inside Google that Will Transform How You Live and Lead, has taken on biblical status among executives who hope to hire and manage just like the wildly successful search giant.

Bock’s core advice: Hire great talent, not people you have to train to be great. “The presence of a huge training budget is not evidence that you’re investing in your people,” he writes. “It’s evidence that you failed to hire the right people to begin with.”

Continue reading here…

UCLA Anderson Review is a window into the cutting-edge research of expert faculty who are drawn to the school from around the globe. They examine crucial topics in business, the economy and the wider world of human existence. Each month, leading journalists report on UCLA Anderson faculty’s newly published research and most provocative working papers. The Review is produced with the support of UCLA Anderson’s Marketing & Communications team (source: https://www.anderson.ucla.edu/faculty-and-research/anderson-review/about)

Individual vs. Joint Taxation

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mauri best

Maurizio Mazzocco

How do different income taxation systems — for instance individual vs. joint — affect people’s decisions and welfare? Answering this question is important because governments can choose among several systems that differ most prominently for the treatment of individuals in married households. They can adopt an individual tax system, following the example of Canada and Sweden, which consider neither spousal earnings nor marital status when determining an individual’s tax schedule. Alternatively, they can employ a joint tax system, like the ones in the U.S. and Germany, which consider only pooled earnings of the couple when determining married individuals’ tax rates and tax liability. Or, they can adopt a hybrid system of the type used by France and the U.K. that borrow elements from both joint and individual schemes. This choice has the potential to produce sizeable short- and long-run effects on individual decisions, economic outcomes, and welfare, as it affects primary and secondary earners’ tax schedules, their contribution to after-tax household income, and correspondingly their incentives to work and save.

In a study titled “Taxation and Household Decisions: An Intertemporal Analysis”, Professor Maurizio Mazzocco and coauthor Mary Ann Bronson (Georgetown University) study this choice between tax systems by estimating how they affect economic decisions, with emphasis on the long-run consequences. The project is divided into two parts.

The first part of the study uses a variety of data sources to document that the choice of a tax scheme has the potential to produce large effects on the decisions to work of primary and secondary earners. The main finding is that the joint taxation system adopted by the U.S. creates incentives for married couples to have the primary earner specialize in labor market activities and the secondary earner in household activities, relative to the individual system. A switch to individual taxation has therefore the potential to significantly increase the labor force participation rate of U.S. women. This first part uses only data to document the effect of changes in tax systems. Thus, as tax reforms affect entire populations, it can only provide suggestive evidence on their effects.

In the second part of the project, Mazzocco and Bronson quantify the short- and long-term effects of tax reforms by developing and estimating a dynamic model of household decisions. They use the model to evaluate three popular tax policies: a shift from a joint to an individual taxation system; the introduction of a secondary earner deduction in a joint taxation system; and the addition of child care subsidies to a joint and to an individual taxation system. The results indicate that the transition from a joint to an individual taxation system has significant long-term effects on choices and welfare, with married households in which only one spouse works being the most affected. The study finds that the labor force participation of secondary earners increases by as much as 5 percentage points. The move to individual taxation changes also how secondary earners allocate time between market and household activities. The authors find that they reduce the time devoted to household activities and increase the hours spent in the labor market, with the increase in labor hours that is smaller than the decline in household time. The corresponding increase in leisure for secondary earners is explained by a shift in intra-household decision power toward women of three percentage points generated by the tax reform. The secondary earner deduction policy generates similar results. The child-subsidy policy also increases the fraction of secondary earners who work and their labor supply at the expenses of time devoted to household activities under both the joint and individual taxation system. But the impact is significantly larger under the individual system. Consequently, if the goal of the child-subsidy policy is to increase female labor force participation, it is more effective and less costly under an individual scheme.

In the current economic environment, there is a general belief that women should be empowered through an increase in their labor force participation. The project’s results indicate that tax reforms are an effective way of achieving this goal.

Aaron Behle

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Aaron Behle Photo

Aaron Behle

“Never pass up on a free meal” might sound like cheeky advice for a college student struggling to get by but for Aaron Behle it means something entirely different.

In fall of his Junior year in the UCLA Economics program, the family member of a friend who worked at Ernst and Young invited Aaron to a free steak dinner. Aaron took him up on the offer and was soon having dinner with a room of public accountants. “I honestly had no idea what public accounting was,” Aaron recalled with a laugh. “I had an amazing dinner with all these smart people and it was a great on-ramp for my career path.” That night ended up being a decisive moment for Aaron as he quickly started adding classes to his schedule for a minor in accounting. A year later, he interviewed for all six top accounting firms at the time and landed a job at Deloitte, as luck would have it, starting his first job post-graduation as a public accountant.

Aaron’s advice has nothing to do with saving on your groceries but instead to never pass up an opportunity when it comes your way. It seems for Aaron many of those opportunities have often come through meeting people, from launching his career in public accounting to ending up in international business years later. Even during his time at UCLA, Aaron says that it was the professors and connections he built through the Honors program that allowed him to gain a greater understanding of economics that would be the foundation of his career.

“I was fortunate enough with the teachers I had that presented with this great bridge between theory and reality and that to me was really important. They gave me this great toolbox of economic theory and equations and then actually taught me how to apply it to the real world.”

In fact, Aaron still remembers his Economics 1 professor, the emeritus chairman of the economics department at the time, William R. Allen. From his first economics class, Aaron built a relationship with Allen, and ultimately the chairman ended up playing a large part in his academic career. In Aaron’s senior year he wrote two papers with Allen, one of them focused on the rapidly transforming state and economy of South Africa which at the time was just leaving behind the system of apartheid. Nearly thirty years later, Aaron still stands by his research, saying “South Africa at that time was at the tipping point of apartheid and my position was that the injection of capital would accelerate free market capitalism, competition and opportunity; there is no room for racism in competitive markets.”

And remarkably, what Aaron learned truly followed him in building his career. In lieu of Aaron’s own advice on taking opportunities, Aaron was interviewing for a finance job when he was unexpectedly offered a position in business development for the global sports equipment and lifestyle brand Oakley. Oakley was expanding to international markets, and when, in a turn of events, Aaron was hired in the development department instead of finance, he ended up in none other than South Africa. Aaron narrated the incredible circumstance, “I graduate in 93, in 96 I’m in South Africa working for Oakley setting up a company!”

Speaking about the trajectory of his career, Aaron says, “There are no straight lines in nature and no straight lines in life, certainly in today’s market more than ever.” He believes that you may never know where you will end up years later, the best approach is to take the opportunities as they come your way. And that is exactly how after starting in public accounting, Aaron was launched into a successful career working with global consumer products brands including Oakley, Reef, Dragon, Skullcandy, and now, Salt Optics.

But when asked if he ever lost his economics knowledge, Aaron laughed, “It never leaves.” He remarked that every step of the way in his career in business, the economics he learned at UCLA was a relevant, key tool for him. On the importance of what he learned in the economics program, Aaron said, “Economics is like studying the organism of commerce… You would be very surprised at the practical application of what you learn.” In fact, he has seen economics concepts reflected in the international markets he has worked in: “Spending almost my 30 years with global businesses, I have seen economic theories play out via changes in political regimes, geopolitical conflict, trade sanctions, currency manipulation, trade agreements…the list is long”

In fact, with Aaron’s background as a student studying economics and now his accumulated years of experience working in international markets, he has come back to guest lecture in the economics department teaching courses in pricing theory and compensation. Now with his “immediate exposure to currency fluctuations and impact on pricing” that he gained from his work in global business, Aaron brings a new, practical perspective to the theory.

“When I do my pricing course I talk a lot about that. When you are involved in global markets where the currency is constantly in flux, we discuss how that impacts your sourcing strategy and how you price the product to the end consumer today, a month from now, six months from now and how you develop product and sourcing strategies with these pricing changes. A lot of that is what I learned first-hand in the context of economics.”

At the beginning of the discussion, Aaron said regarding his humble beginnings as an economics student that from the start “[he] was all in”, and that has stayed true even now. While Aaron has taken every great opportunity that came his way from an unexpected start in public accounting to launching his career in international business, Aaron has stayed true to his commitment to be a lifelong student of economics. He applied it to his career while the experience he gained allowed him to develop a greater understanding of the workings of “the organism of commerce.” Now Aaron’s beginnings in the UCLA economics department has come full circle as he teaches students the connection between theory and application that his professors once taught him. This is the definition of a true Bruin.

 

Written by Katia Arami, UCLA Undergraduate Student

Adriana Lleras-Muney wins the Warren C. Scoville Distinguished Teaching Award

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The UCLA Department of Economics would like to congratulate Adriana Lleras-Muney for being awarded the Warren C. Scoville Distinguished Teaching Award for best undergraduate teaching in Fall 2019 for her class Econ 130–Public Finance.

This course explores the role of governments in the economy. It analyzes why governments intervene in some markets and not others and the history behind some of our social programs. Discussions center on many of the issues currently facing policy makers including Medicare, public education, and tax policy.

Warren C. Scoville was a faculty member for the UCLA Department of Economics for 28 years before his death in 1969.  This award is given quarterly in his name to the ladder faculty member who receives the highest teaching evaluation scores from his or hers course.

Professor Giorcelli recognized by Kiel Institute

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Professor Michela Giorcelli has been named a winner of a 2020 Excellence Award in Global Economic Affairs from the Kiel Institute for the World Economy. The other award winners are Luigi Bocola (Stanford), Teodora Boneva (Oxford), and Javier Cravino (Michigan and former UCLA Ph.D. student).

The aim of the Excellence Award is “to build a community of the brightest young researchers in the area of global economic affairs.” The Kiel Institute provides award winners with intellectual, financial, and administrative support to pursue focused programs of research in designated areas. The award includes a fellowship and a research visit to the Kiel Institute.

Professor Ohanian’s Research featured in The Economist

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Professor Ohanian’s research was recently discussed in an article published in The Economist. The article, “Housing is at the root of many of the rich world’s problems” was published in the January 16th edition and an excerpt can be found below—

Housing is at the root of many of the rich world’s problems

Since the second world war, governments across the rich world have made three big mistakes, says Callum Williams

The financial crisis of 2008-10 illustrated the immense dangers of a mismanaged housing market. In America during the early to mid-2000s irresponsible, sometimes illegal, mortgage lending led many households to accumulate more debt than they could sustain. Between 2000 and 2007 America’s household debt rose from 104% of household income to 144%. House prices rose by 50% in real terms. The ensuing wave of defaults led to a global recession and nearly brought down the financial system.

 

Continue reading….

Predicting and Preventing Homelessness Report

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UCLA Department of Economics Professor Till von Wachter worked alongside the California Policy Lab and the University of Chicago Poverty Lab to publish a report on Predicting and Preventing Homelessness.  They used Los Angeles County data on multi-system service use to predict homelessness among single adults receiving mainstream County services.  By identifying people at high risk of first-time homelessness or returns to homelessness and understanding risk factors associated with future homelessness, the County can more effectively target its homelessness prevention efforts to ensure limited resources are going to those most likely to benefit from them.

Since being released on December 16th, 2019, the report has been referenced in many articles across the country.

Resources:

Full Report: Predicting_and_Preventing_Homelessness_in_Los_Angeles

LA Action Plan: LA County Homeless Initiative Press Release about their new action plan

Featured Articles:

Los Angeles Times: Is there a way to predict who will become homeless? These UCLA researchers say yes

Santa Monica Mirror:  UCLA Study Suggests Algorithm Can Prevent Homelessness