How much is Amazon worth to you?

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Professor Lee E. Ohanian and Jesus Fernandez-Villarverde were recently featured in The Hill on September 6, 2020 for their opinion piece regarding the success of Amazon and it’s place in our current economy. 

 

Excerpt: 

Jeff Bezos, founder of Amazon and owner of about 11 percent of Amazon stock, recently became the first person in history to be worth more than $200 billion. Bezos’s net worth has skyrocketed as Amazon’s share price increased about 85 percent since February, before the pandemic.

Bezos’s success, however, is not toasted in all quarters. Many despise that Bezos grows wealthier while many others are suffering during the pandemic. Just last week, protesters set up camp outside Bezos’s house with guillotine in hand, demanding that Bezos share his wealth and pay Amazon workers a $30 per hour minimum wage.

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Do Youth Employment Programs Work?

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Adriana Lleras-Muney

According to the Bureau of Labor Statistics, about 10% of workers today are unemployed. This rate however is at least twice as high among those ages 15-25. This pattern is not unique to today. In fact, youth unemployment rates have always been much higher than unemployment rates for the rest of the population, at least since 1948 when official statistics started reporting unemployment rates. For this reason, many federal and local governments around the world have designed and implemented youth training programs to help unemployed young people. Although there is a great deal of variety in the design of these training programs the basic idea is to provide youth with work experience in the hope this experience will help them in the labor market.

A large literature has investigated whether these programs are effective. The consensus today, based on hundreds of studies, including randomized experiments, suggest that these programs have at beast modest effects on the employment and wages of participants. In fact, many question whether these gains justify the cost, and have called for the elimination of these programs today. For example, the largest youth training program in the US today is Job Corps, a federal program that spends 1.7 billion dollars annually, has been deemed a failure by critics. However, most job training program evaluations focus only on short- and medium-term outcomes. In fact, most evaluations have only followed participants for less than three years. Moreover, they have considered impacts on employment and earnings only.

In Do Youth Employment Programs Work? Evidence from the New Deal (NBER Working Paper 27103), Professor Adriana Lleras-Muney and her co-authors (Anna Aizer, Shari Eli and Keyoung Lee) study the lifetime effects of the first youth training program in the US implemented during the Great Depression, when youth unemployment rates were estimated to be around 60%. She shows that just under 10 months’ enrollment in the Depression-era Civilian Conservation Corps (CCC) increased lifetime earnings for disadvantaged young men by an average of 4.6 percent, even though it had no measurable effect on short-run labor market activity. The CCC also improved long-term health and survival. CCC men who trained for one year lived almost one more year as a result.

Between 1933 and 1942, the CCC employed about 3 million men in 2,600 camps. Created to address high youth unemployment rates by providing “relief through work,” its laborers contributed to public works projects such as developing national parks, preserving forests, and construction of land irrigation systems. CCC enrollees were unemployed and unmarried men, who were American citizens aged 17 to 25 and in good health.

After completing six months of training in camps, CCC enrollees could reenlist for another three 6-month periods. Participants were paid $30 per month and were required to send $25 to a designated family member. Enrollees were posted in camps of about 200 people, where they received meals and medical treatment such as vaccinations. In addition, enrolled men could receive formal and informal schooling at the camps.

The data for the study were constructed using CCC administrative records in state archives of Colorado and New Mexico. The records include information on 28,343 men who enrolled in the CCC between 1937 and 1942, including dates of birth, family information, enrollment data, camp assignment, reason for separation from the program, and some physical data. The data were them merged to 1940 census records, WWII enlistment records, death certificates and Social Security Administration records.

For those who lived to age 45, an additional year of training increased the age at death by one year.  Life expectancy for this group was 73.6 years of life. Short-term employment results for the 4,000 men who participated in the CCC before 1940 and could be matched to the 1940 census showed that although training increased geographic mobility by about 15 percent, it had negligible effects on earnings or weeks worked. Individuals who trained for longer were not taller at the time of enlistment. But for the 5,500 men who could be matched to World War II enlistment records, a year of CCC training was associated with an additional inch in height, an indicator of better health.

Men who participate in the modern federal Job Corps (JC) program are similar to the CCC participants in age, duration of enrollment, and reasons for leaving the program.  Lleras-Muney and co-authors conclude that the lessons from the CCC may therefore carry over to current Job Corps participants.  Like CCC participants, JC participants obtained more education, reported being healthier and were more likely to move after their training. Thus, based on the CCC results, it is likely that JC participants will also live longer lives as a result of JC participation

 

Lloyd Greif

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Lloyd and Renée Greif, and their children (Ben, Nick and Lauren) at Bruin Woods.

UCLA is ranked as the top American school for economic mobility, and there is no better example than that of Lloyd Greif. Once a full-time student and employee, he worked his way to become one of UCLA’s most prestigious alumni and one of California’s most accomplished investment bankers.

Before coming to Westwood, Greif grew up in a humble environment just a few miles away. The son of a single parent, he shared a one-bedroom apartment with his mother and older brother. When the time came for Greif to apply to colleges, he knew his options would be limited by the high price tags on many private universities. His college counselor made one recommendation: UCLA. He applied exclusively to the Westwood school and received his acceptance. However, upon coming to the university, Greif didn’t live the ‘typical college experience.’ He spent his UCLA years working 40-hours-a-week at Ralphs Grocery Co. while managing a full-time academic program, commuting to campus all four years to accommodate his busy work schedule.

For example, waking up at 11pm, he would make his way to the local Ralphs store for an early morning shift, leading the team in the process of beginning the day’s work, having taken on a role on the graveyard shift, first as a clerk, and then as grocery manager. Finished by 9 am and in a classroom by 10, he would begin his classes at UCLA. This was a typical day for Greif during his four years at UCLA. Today, he jokingly boasts, “I never needed to sleep much to get good grades!” But while the times were tough and his sleep was slim to none, that didn’t stop him from becoming a top performer in school and graduating right on schedule

But Greif’s path at UCLA wasn’t necessarily simple; he didn’t decide until his last year to get his degree in economics. After testing the waters of political science, Greif realized that studying election trends didn’t appeal to him and he instead turned to economics with the guidance of his Ralph’s store manager. For Greif, economics wasn’t just an academic subject; it was a way of thinking and navigating life experiences. The undergirding principles of supply and demand resonated with his approach to life and business, and he found himself squeezing in the majority of his upper division courses during his senior year to finish on time.

After graduating, the same manager told Greif about an opportunity to study food industry management at USC on a Ralph’s scholarship. He applied for the program and ultimately graduated with an MBA from the Marshall School of Business. Greif says the degree opened doors for him as he entered the corporate world and became a management consultant at Touche Ross (now Deloitte). During this time, he simultaneously worked as a consultant during the day and earned his law degree from Loyola Law School at night, completing a trifecta of degrees from Los Angeles’ top three universities.

After two years, Greif was recruited by the investment banking firm of Sutro & Co. a meritocratic workplace that would enable him to climb the ladder of investment banking. Greif says about the transition: “I took to investment banking like a duck takes to water. I mean, it was a hand in glove fit for me.” Within six months, he brought in his first client, and he ushered in another client six months later, a feat rarely accomplished by new, junior-level hires. Before long, Greif was the top performing employee at Sutro and became the firm’s vice chairman and head of investment banking. Today, Greif advises current students on the importance of working in a meritocratic environment where you will be rewarded and advance according to your skills and work ethic.

In 1992, Greif left Sutro to form his own investment bank, Greif & Co., with a founding principle originating from Luke 6:31 of the Bible: “Do unto others as you would have them do unto you.” As an investment bank specializing in serving entrepreneurs, solely focusing on the client’s best interests became a critical component to the success and ethics of Greif’s firm. Greif & Co. offers a variety of services to its clients, from raising debt and equity financings to arranging mergers and acquisitions. Although Greif’s investment bank has an extensive breadth of professional achievements to boast of, he takes exceptional pride in its integrity and morality. Unlike numerous financial institutions that have been engulfed in scandals, Greif & Co. has earned its reputation of transparency and trustworthiness. Understanding that integrity in business is something that requires constant effort and vigilance, he has made it abundantly clear to prospective business professionals that if “you cast your bread on the water, it will come back to you.” Greif also gives back to his community, as past Chairman of the Los Angeles Economic Development Corporation and a member of the Board of Directors of the California Chamber of Commerce. Greif is one of the few members of his industry who is actively engaged in civic, philanthropic and political affairs, working collaboratively with government agencies to create the framework for a more robust and just society.

In 2019, Greif was asked to deliver the commencement speech for UCLA’s Department of Economics, an opportunity to share his wisdom with the graduating class and a unique honor bestowed on the field’s most influential figures. When speaking to the next generation of Bruin professionals, Greif stressed the importance of ethical business practices and the gravity of putting your client’s interests first. “There are no gray areas in business, just like there are no gray areas in life,’’ Greif said in our interview. “You know when you’re doing the right thing because your conscience tells you, and you know when you’re doing the wrong thing. It doesn’t matter if anybody else is looking. You’re looking and you know it.” Greif returned this year to deliver a virtual commencement speech for UCLA’s Centennial celebration.

He fondly reflects on his time as a Bruin, and more particularly, his time spent at Bruin Woods, UCLA’s family resort in Lake Arrowhead. For roughly a decade, Greif and his family spent a week every summer at Bruin Woods making friends with other alumni and taking time to relax. For him, Bruin Woods was pure family time, a week where even the adults were true campers, and it’s an experience he recommends to all Bruins.

As for young Bruins looking to follow in his professional footsteps, Greif leaves them with some simple, yet meaningful advice: “It’s important to maintain your own moral compass. Don’t let the industry you’re in or what other people do have any negative influence on you. Let your conscience be your guide. You’ll sleep well at night knowing you did right by your clients and did the absolute best job you could for them.”

Written by Katia Arami and Andreas Papoutsis

Finis Welch (1938-2020)

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Finis Welch
1938-2020

Finis Welch passed away unexpectedly on August 24, 2020. A resident of Bryan and Centerville, Texas, Finis was a world-renowned economist, highly successful entrepreneur and accomplished rancher. The son of Edgar Joe Welch and Addie Houston Welch, Finis Welch was born July 11, 1938 in Pasadena, Texas, and graduated from Pasadena High School.

He went on to earn a PhD in economics from The University of Chicago in 1966 and subsequently had a distinguished career as a Professor of Economics at several leading universities, including UCLA and Texas A&M University. He is widely regarded as one of the world’s preeminent labor economists. His achievements in labor economics earned him the prestigious Jacob Mincer Award in 2007, and he was elected Vice-President of the American Economic Association in 2002.

Finis was the founder and President of Welch Consulting, Ltd, a renowned economics consulting firm. In addition, Finis was cofounder of StataCorp LLC, the firm that develops Stata, the statistical software for data scientists that is used worldwide.

Finis is the founder and sole benefactor of the Finis Welch Foundation. The foundation reflects Finis’ lifelong commitment to education and provides scholarships to high-achieving students who attend public universities in Texas.

Finis was a devoted father, renowned economist, successful businessman, and mentor and friend to many. Finis will be missed.

Hoover Panel with Lee Ohanian

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The Hoover Institution presents an online virtual speaker series based on the scholarly research and commentary written by Hoover fellows participating in the Human Prosperity Project on Socialism and Free-Market Capitalism. This project objectively investigates the historical record to assess the consequences for human welfare, individual liberty, and interactions between nations of various economic systems ranging from pure socialism to free-market capitalism. Each session will include thoughtful and informed analysis from our top scholars.

FEATURING
Edward P. Lazear is the Morris Arnold and Nona Jean Cox Senior Fellow at the Hoover Institution and the Davies Family Professor of Economics at Stanford University’s Graduate School of Business. Lazear served at the White House from 2006 to 2009, where he was chairman of the President’s Council of Economic Advisers.

Lee E. Ohanian is a senior fellow at the Hoover Institution and a professor of economics and director of the Ettinger Family Program in Macroeconomic Research at the University of California, Los Angeles (UCLA).

For more information on this initiative, click here.

To view the upcoming events, click here.

Simon Board wins the Warren C. Scoville Distinguished Teaching Award

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Teaching in the times of Covid

Spring 2020 came with a lot of unexpected changes for both faculty and students due to the COVID-19 Pandemic. Teaching plans were completely altered and everyone had to adapt to this new normal quickly. We are very thankful for all the faculty and their abilities to continue to bring quality education to our students during this trying time–but want to give a big congratulations to Simon Board–the winner of the Warren C. Scoville Distinguished Teaching Award for best undergraduate teaching in Spring 2020.

Simon Board won this award while teaching ECON 106T–The Economics of E-Commerce and Technology. This class analyzes the economics of e-commerce and technology. It identifies the critical features that differentiate the technology firms from traditional industries, and examine the implications for business strategy. The class discusses topics such network effects, switching costs, and platform markets. To complement the economic theory, they students also participate in case studies from various firms every week. Topics include bidding in online auctions, two-sided markets, matching markets and reputation mechanisms.

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 her course.

New Data Science Class

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The Department of Economics is pleased to announce that we are extending the data training for all students admitted to the major beginning in Fall of 2020. A solid foundation of empirical techniques is fundamental in understanding and studying economic phenomena, and increasingly demanded by employers. The new class is entitled Econ 104: Data Science for Economists, and will be accompanied by a lab (Econ 104L). The course will focus on hands-on projects using real world data. It will be offered for the first time in Spring 2021 and will be taught by Professor Rojas.

The new courses will not be required for students who have already been admitted to the major prior to Fall 2020 or who complete Econ 103 by the end of Spring 2021, but going forward will be required for all students majoring in Economics or Business Economics. However, it will be open to all Economics and Business Economics students who wish to take the course.

The new course descriptions for Econ 103 and 104, our two econometrics classes, are as follows:

Econ 103. Introduction to Econometrics
Introduction to theory and practice of univariate regression analysis with emphasis on its use in economics. Introduction to method of least squares, Gauss-Markov theorem, confidence intervals and hypothesis tests in univariate regression context, and standard errors in case of heteroscedasticity and serial correlation. Emphasis on applications with real data and computer software (R programming language) to implement discussed methods.

Econ 104. Data Science for Economists
Introduction to estimation of multivariate regression, and confidence intervals and hypothesis tests in context of multivariate regression. Discussion of instrumental variables and binary choice models. Emphasis on hands-on experience on data analytics and real data applications.

Michael Powell

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Michael Powell

Many of us Bruins reminisce on the moment we decided to come to UCLA. For Dr. Michael Powell this moment occurred at the very top of Janss steps. Experiencing the beauty of campus and Los Angeles from this UCLA gem made it clear that UCLA was the school for him. From then on, Michael describes his life as a “series of good accidents”. At UCLA, Michael’s interest in economics was initially sparked by Professor Ed McDevitt. In particular, he recalls Professor McDevitt’s crystal clear and thought-provoking lectures, always delivered on the whiteboard perfectly without the aid of a single page of notes. After encouragement from Professor McDevitt, Michael decided to pursue economics as a career.

Like many fellow Bruins, Michael Powell joined UCLA as a third-year transfer student from the Bay Area. His jobs at KFC and In-N-Out throughout his years at community college allowed him to focus all his time on academics while at UCLA. Even more, Michael’s experience at these jobs led him to a research career in organizational economics. Michael describes organizational economics as the study of “why organizations look the way they do”. Between his jobs at KFC and In-N-Out, he noticed firsthand how each had a different path for career advancement and how promotion incentives impacted employee productivity and morale. Now, he studies how and why firms design career trajectories for their workers the way they do, and how it impacts their employees throughout their career.

UCLA has more exciting courses than any of us could imagine having the time to take. Whether it be graduate mathematics, astrobiology, or Scandinavian film, UCLA has an overwhelming variety of things to learn. Unless we are lucky enough to be a double (or perhaps triple) Bruin, we only have a few years to take advantage of everything UCLA has to offer. Michael’s solution and recommendation to any Bruin is course auditing. Course auditing provides the chance to learn and experience new topics, without the large time commitment and pressure of grading. While studying for his economics PhD at MIT, Michael took or audited nearly every economics class offered. Auditing gave the opportunity to take advantage of all his time at MIT, learning from renowned economists like Esther Duflo and Amy Finkelstein.

To further maximize his time at UCLA, Michael earned a Master’s degree in economics through the Departmental Scholars Program. This program offered by the economics department allows students to spend an extra year at UCLA to take graduate courses during their fourth and fifth years. Especially as a transfer student, the opportunity to spend another year in Southern California was too good to pass up. Although he would go on to take similar classes in graduate school at MIT, each professor and university brings a different point of view and focus. For a career in economics, this additional perspective is highly valuable in developing the unique skills and intuition needed to approach complex problems in school and beyond. Once Michael started doing graduate work in economics, it was “hard to imagine doing anything else”, and he would go on to earn his PhD in economics at MIT.

Now, Michael is an Associate Professor of Strategy at the Kellogg School of Management at Northwestern University. The responsibilities of the job are twofold: research and teaching. The process of publishing your first papers as a professor is challenging, as papers are often rejected from journals and subject to harsh criticism. However, for Michael this feedback helped develop the tenacity and determination needed to become a successful economist and researcher. At Kellogg, teaching highly engaged MBA students is particularly rewarding. The smaller classes and high levels of student participation provide a unique challenge but an exciting teaching job. Overall, UCLA gave Michael the tools to succeed at the highest level of academia and contribute to the advancement of economics as a researcher, teacher, and collaborator.

by Claire Nelson.

Infrastructure, Development and the Marshall Plan

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Michela Giorcelli

The Marshall Plan, sponsored by the United States between 1948 and 1952 to help Europe recover from World War II, is the largest economic and financial aid program ever experienced in the world. It transferred to European countries $130 billion (in 2010 USD), around 5 percent of US GDP in 1948, which was mainly used to provide immediate relief and to fund the reconstruction. Economic historians have long recognized the importance of the Marshall Plan in developing pro-market institutions in Western Europe. However, little is known yet about its causal effect on the recovery and development of local economies within European countries.

In the paper “Reconstruction Aid, Public Infrastructure, and Economic Development”, Professor Michela Giorcelli (UCLA) and Nicola Bianchi (Kellogg School of Management) study how the Marshall Plan affected the postwar local economic development of Italian provinces. Italy was the third largest recipient of Marshall Plan aid. It received $12 billion between 1948 and 1952, on average, 2.3 percent of its GDP for five years. Professor Giorcelli collected and digitized data on all 14,912 Marshall Plan reconstruction projects in Italy, as well as data on war damage documented by US authorities between 1947 and 1949, matched with provincial economic outcomes from the Italian Bureau of Statistics, as well as detailed data on Allied bombing during WWII, compiled by the US Air Force.

Professor Giorcelli documents that the Marshall Plan had a positive effect on local economic development. Provinces with more reconstruction funds experienced larger increases in agricultural production—between 10 percent and 20 percent for major crops. This effect started only after the completion of the first public infrastructure funded through the Marshall Plan. The fact that provinces with more bombings and greater damage were able to redesign their transportation system out of necessity might have played an important role. More efficient roads and railways might have allowed farmers to reach more distant markets more quickly, essentially increasing demand for their agricultural products. Consistent with this hypothesis, the estimated effect of reconstruction grants is positive and large for perishable crops (a threefold increase for fruit with a short shelf-life), but not statistically different from zero for products with a very long post-harvest life (8 percent decrease for tree nuts).

In addition to increased production, structural changes to the labor markets happened. In provinces with more reconstruction money, the number of agricultural workers decreased disproportionately by 21 percent. Manual labor was replaced with mechanical tools, thanks to a fourfold increase in the use of tractors. Workers who did not find postwar employment in agriculture were absorbed by the booming industrial and service sectors. In provinces with more reconstruction money, there was a larger increase in the number of active firms, especially those with fewer than ten employees. More efficient roads and railways might have decreased the barriers to entering the industrial sector.

Finally, Professor Giorcelli estimates the contribution of the Marshall Plan to Italian economic growth in the 1950s and 1960s: for every $1 additional reconstruction funds per capita that a province received (compared to others), its GDP per capita increased by $1.9 to $2. A back-of-the- envelope calculation shows that the Marshall Plan contributed 1.3 percentage points to Italy’s 5.9 percent average annual GDP growth rate during the 1950s, showing the transformational consequences of the Marshall Plan.