On January 6th, 2020; the Washington Post published an article regarding the health impacts of recession. In it, the author cited Professor Till von Wachter’s research and paper with Northwestern University’s Hannes Schwandt.
Washington Post Article: Don’t Root For a Recession to Knock Out Trump by Catherine Rampell
Carrera, Felipe
Cartels are a common feature in most economies. For instance, in the 2015-19 period, the European Commission imposed fines in excess of €8.3 billion in 27 cartel cases. It is well understood that cartels reduce social welfare by increasing prices and restricting output. Cartels may generate additional costs to society by increasing the market share of less efficient producers.
One way in which this may happen is if during cartel episodes low-productivity firms are tempted to enter the market by the artificially high profits generated by the cartel, raising productivity dispersion and reducing total surplus. This intuitive mechanism has so far not been quantified because of data limitations: A researcher dealing with this question needs to know with certainty when cartels started and ended, and to have detailed plant-level data. And, since cartels are illegal throughout the developed world, it is very difficult to access the necessary information in modern settings.
In his job market paper, “Cartels, Entry, and Productivity: Evidence from the Chilean Nitrate Cartels”, UCLA PhD students Felipe Carrera and Vitaly Titov quantify the effect of cartels on the quantity and quality of new firms in an industry with low barriers to entry by studying the Chilean nitrate cartels in the early 20 Century. This industry is attractive because cartels were legally enforceable, entry barriers were low, and, over 35 years, the industry switched between cartel and perfect competition multiple times.
Using a newly collected dataset, created from original handwritten archival records, they show that during cartel periods, average entry increased from 5 to 9 plants per year. Moreover, entrants during cartel periods were one-third less productive than average firms. Building on these findings, they build a model of firm entry and conduct two counterfactual simulations. First, using detailed accounts from historical records about these cartels’ inner workings, together with their structural estimates, they are able to show that low barriers to entry lowered incumbent profits by 40%. Second, they estimate a model of firm dynamics and show that had the cartel not existed, 25% of plants would have postponed or cancelled their entry to the industry.
These findings are important from a historical and present-day perspective. In the early 20 Century, Chile’s nitrate industry dominated the country’s economy, accounting for 65% of exports and 45% of government revenues. The excess entry lowered the mean productivity of the industry by 3% and had a measurable effect on tax revenue and GDP. This poses important lessons for other developing countries that are dominated by extractive industries. Moreover, the paper speaks to the literature on productivity dispersion by showing that market power caused by coordinated action by otherwise independent firms can generate substantial amounts of inefficient entry.
Claudia Toussaint
Some of the most powerful influences in our lives emanate from things we cannot see – legal frameworks, for example. The impact of the law is pervasive not only in our personal lives, but also in the intricacies of our economy, and Claudia Toussaint has dedicated her career to understanding these intersections.
Growing up in Germany, Claudia originally found out about UCLA through the experiences of her mother, who attended the Westwood institution for a short spell before securing a Fulbright Scholarship. Inspired by her mother’s experience and the school’s reputation, Claudia decided to explore an academic experience in the United States; but her journey was not a walk in the park.
UCLA initially rejected her. So, she made her way to the admissions office, out of genuine curiosity, academic records in hand, to ask how she could improve her future chances. Upon further review, Claudia was offered enrollment at UCLA, and her life as a Bruin began on the heels of perseverance. “When you are curious, when you really want to understand the reasons behind decisions, that is something that can pay off in unexpected ways,” Claudia shared.
Claudia’s immersion at UCLA exposed her to one of the campus’ most appealing traits: its diversity. She did not just experience diversity of race, ethnicity or religion, but diversity of ideas, backgrounds, personalities, and even academic opportunities. In Westwood, she had the ability to take classes across multiple fields of study while establishing a strong quantitative background within her economics major. She found one of her strongest connections with an international student from China, and the two worked together to refine their interdisciplinary skills and exchanged perspectives about their very different countries of origin.
In 1988, Claudia graduated from UCLA with a degree in economics, and quickly sought to expand her skill set. “I thought the law would be a good way to apply what I learned, and build upon what I perceived as my strengths,” Toussaint said.
That fall, Claudia enrolled at University of California, Hastings College of Law, where she could continue exploring the intersections between business and law. Her experiences in law school built upon the analytical skills developed in her economic studies and enabled her to better understand the law’s invisible influence on societies. Once Claudia had earned the credentials necessary to become a practicing attorney, however, a new obstacle confronted her: a professional environment historically dominated by men.
In a field where less than 21% of lawyers were female at the time, Claudia secured a job as a transactional attorney at Morrison & Foerster in Los Angeles, spending five years at a firm that embraced diversity and her ability to practice law at the highest levels. But her greatest strengths still lay in her interdisciplinary thinking, and in 1997, she joined Sprint’s in-house legal team in the Kansas City area. She eventually went on to become the company’s Vice President and Corporate Secretary. She used her talents to build diverse, dynamic and high-functioning legal teams, and to support milestone corporate transactions, including the elimination of the company’s tracking stock structure, the $35 billion merger with Nextel, and the spin-off of Embarq. In the fall of 2014, after General Counsel roles in several companies, Claudia joined Xylem Inc., a water technology business.
At Xylem, Claudia serves as the Senior Vice President, General Counsel and executive sponsor for the company’s ESG (Environmental, Social & Governance) strategy. She helps shape the company’s strategy and execution, all aimed at solving the world’s greatest water challenges with innovative technologies. She also continues to be a strong advocate for building diverse and inclusive teams, knowing it will give Xylem a competitive talent advantage and accelerate the innovation necessary to realize the company’s ambitions. Her contributions go well beyond addressing legal or regulatory matters; her days are largely filled with questions that require policy and resource trade-offs, with a heavy reliance on interdisciplinary data analysis and, ultimately, alignment with the company’s values of respect, responsibility, integrity and creativity.
“In economics, you think about resource allocation, and in my work I spend most days thinking about precisely that,” Claudia said. “In addition, the grounding in economics finally enabled me to feel comfortable understanding, using and challenging numbers, whether they are about finance, operations or social impact,” Claudia said. “To make a difference, whether in business or in broader society, it is incredibly important to be conversant in the language of business, which largely is a language of numbers.”
Claudia now reflects fondly and with gratitude on her days at UCLA, where she says she learned a fundamental lesson: curiosity is invaluable. “Professionally and personally, curiosity will drive your discovery of whether you’re on the right path,” Claudia said. “I really found my path when I became genuinely curious about how and why things are the way they are and I give huge credit to UCLA for awakening and nurturing that curiosity in me. It is the reason I am so passionate about the value of learning for us as individuals and as societies.”
Board of Visitors
Jeffrey Leitzinger
Founder and Managing Director at Econ One Research
Dr. Leitzinger is an economist with almost 40 years of experience in research and consulting. He started his career with a large national economic consulting firm and rose over the next seven years to join the firm’s Board of Directors. He has since founded two research and consulting firms, the latter of which, Econ ONE Research, is a successful international firm with six offices in the US and one in Asia.
Dr. Leitzinger has served as an economic expert in major US antitrust cases including Microsoft, American Express and, most recently, Qualcomm. He has published and presented frequently on antitrust matters and is a member of the Advisory Board of the American Antitrust Institute. He also has filled Board positions for banks, insurance companies and charitable organizations here in Los Angeles. He resides in Pasadena, California.
Dr. Leitzinger received his Bachelor of Science Degree in economics from Santa Clara University. He received Masters of Arts and Doctoral degrees in economics from UCLA
By Lee Ohanian
In 2011, superstar investor Warren Buffett made headlines not for his investment recommendations but for his opinion that tax rates on high earners should substantially increase.
Buffett proposed the Buffett Rule, which would impose a minimum 30 percent effective tax on those with incomes exceeding $1,000,000. This was supported by then-President Barack Obama and 2016 Democratic Presidential nominee Hillary Clinton.
Buffett repeated his opinion earlier this year, arguing “The wealthy are definitely undertaxed relative to the general population.”
Buffett does this by transferring the income growth in his assets into price appreciation of Berkshire Hathaway stock, which is the corporation that he runs. The tax is not due until the stock is sold.
The Economics Department is delighted to announce the renaming of its undergraduate Value Investing Program after the field’s pre-eminent pioneer, Benjamin Graham. With the concurrence and encouragement of Mr. Graham’s son, Dr. Benjamin Graham, Jr., the program will now be known as the Benjamin Graham Value Investing Program.
Benjamin Graham, widely known as the “father of value investing,” graduated from Columbia University at age 20. He began a storied career on Wall Street, eventually founding the Graham-Newman Partnership, where he employed Warren Buffett. Mr. Graham also took up teaching positions at Columbia University and later at UCLA. He wrote two of the founding texts in neoclassical investing: Security Analysis (1934) with David Dodd, and The Intelligent Investor (1949). Benjamin Graham’s investment philosophy stressed investor psychology, minimal debt, buy-and-hold investing, fundamental analysis, concentrated diversification, buying within the margin of safety, activist investing, and contrarian mindsets.
“We are thrilled that our Program will now be linked with the legendary Benjamin Graham,” said Adjunct Professor and Program co-founder William E. Simon, Jr. “As it happens, our classes take place in the same building where Benjamin Graham taught here, and knowing this reinforces our commitment to honor his legacy, especially his dedication as a teacher.”
Undergraduates in the Benjamin Graham Value Investing Program learn to evaluate investment opportunities as well as to direct capital to enhance value. The program’s industry-based curriculum prepares students through applied research projects, financial modeling, and group projects in four core concentration courses: Introduction to Value Investing, History of Financial Crises, Applied Value Investing, and Special Projects in Investing. To complete the concentration, students must also select two additional courses from: History of Capitalism in the American Economy; Corporate Finance; Pricing and Strategy; Investments; Real Estate Finance and Investment; Development of Economic Institutions in Western Europe; and Financial Statement Analysis. Upon completing the program, students understand the full set of fundamental economic and strategic forces that favor or disfavor a particular investment opportunity from both a theoretical and practical perspective.
The Program, co-founded by Andrew Atkeson, Stanley M. Zimmerman Professor of Economics and Finance, together with Professor Simon, offers students significant industry exposure from experts in the field. Distinguished guest lecturers serve as “Investors in Residence” who share their experience as chief investment officers and portfolio managers. In addition, students have the opportunity to work closely with the buy-side industry through an honors-level, applied investment project. Private equity firms, hedge funds, mutual funds, pension funds, and endowments submit “Requests for Project Proposals” which are then assigned to teams of three to five students. Each student group is expected to attend and participate in all class meetings with the hosting professor, while engaging with their firm liaison on a regular basis. The course culminates with the submission of a comprehensive research report and a student presentation on campus delivered to the participating firm and its management team.
Students are admitted to the Benjamin Graham Value Investing Program by application only. The application for the 2020-2021 concentration will launch in spring 2020 for fall enrollment, which will be limited to 40 students. To learn more about the Benjamin Graham Value Investing Program, please contact Professor Atkeson (andy.atkeson@gmail.com), Professor Simon (Simon@law.ucla.edu), Humberto Merino-Hernandez (founding manager of the Program, hmhernandez@econ.ucla.edu) or Tony Winston (Program Manager, twinston@econ.ucla.edu).
Beginning with the Fall 2019 graduating class, our Economics and Business Economics Bachelors, Master of Applied Economics, and Economics PhD programs will be officially classified as STEM (CIP code 45.0603). The STEM designation signifies the analytical rigor of our classes, which trains students in statistics and programming but also teaches them to see the world through the lens of economics. It opens up more job placement and grant opportunities for our students and we are looking forward to seeing how this will continue to develop our program offerings.
STEM (CIP Code 45.0603): A program that focuses on the systematic study of mathematical and statistical analysis of economic phenomena and problems. Includes instruction in economic statistics, optimization theory, cost/benefit analysis, price theory, economic modeling, and economic forecasting and evaluation.
David DeWolf
We often hear the classic phrase, “Bruin born, Bruin bred, Bruin til the day I’m dead.” Even our first experience at orientation–that almost baptismal dip into the inverted fountain–is meant to reinforce such adages. Tens of thousands can say they attended UCLA as an undergraduate, but far fewer alumni can also claim UCLA attendance for their graduate education. David DeWolf is a Bruin through and through, and his journey to Westwood began in high school when the academic reputation and in-state tuition swayed him to enroll at the Westwood campus.
David always wanted to run his own business and felt UCLA would give him the best opportunity to do so. He found no shortage of academic opportunities, but David also wanted a school that offered a vibrant social community and world-renowned athletics program. In 1989, he made the trip from San Diego and officially became a Bruin.
The Rose Bowl and Pauley Pavilion were routine stomping grounds for him during his time in Westwood, but he never lost sight of his utmost priority: finding challenges in the classroom. He entered UCLA as an Economics major with an eye towards the Business Economics program. Through this academic track, he became exposed to Professor David Ravetch, one of the school’s most popular and recognized professors. Ravetch, who also sports two degrees from UCLA, brought to life a seemingly monotonous field in accounting. At the time, it turned out over half the CEOs governing Fortune 500 companies held CPA certifications and had backgrounds in the field.
For a 19 year-old student with little career direction, that single statistic was enough for David to focus his studies in Business Economics. He joined the Student Accounting Society and went on to take four classes with Professor Ravetch. In 1993, David graduated from UCLA with a Bachelor of Arts in Business Economics, thrusting himself into the workforce.
His first employment opportunity was at the accounting firm Price Waterhouse, which he discovered through on-campus recruiting. David still credits much of his exposure to professor Ravetch, who still campaigns for professional recruitment on campus. David earned his CPA license, and wanting to use his accounting work to explore other fields, found a position at 20th Century Fox in international finance. After only a year, he received an offer to work at Fox Sports, who had recently acquired NFL broadcasting rights.
As he continued his professional endeavours, David weighed going back to school versus a job opportunity at Sand Hill Capital, a financial services company that provided debt and equity solutions to venture capital backed start-ups. Two years after leaving Sand Hill, David returned to Westwood by enrolling at the Anderson School of Management.
In 2005, David graduated with his Master of Business Administration and co-founded Quantum Wealth Management with fellow Anderson graduate, Dr. Darius Gagne, who had also earned his PhD in quantum physics from UCLA. Their firm sought to understand how the principles behind quantum physics could provide elegant solutions to complex problems, and merge those underlying principles with financial planning. Through financial planning, David and his group provided select clients with personal wealth management, using elegant solutions to manage capital resources and maintain client peace of mind while transitioning through various phases of life. The key to their success? Following uncomplicated, common sense management strategies, to achieve the desired financial position of their clients.
In 2012, Quantum merged to form Abacus Wealth Partners, where David currently sits as Chief Financial Officer and a partner of the firm. Abacus is a Certified B Corporation, prioritizing community improvement, workplace benefits, and legal accountability to balance profit and purpose–business as a force for good. David’s firm donates five percent of its profits to charity, creates charitable grants, and guarantees six months of paid parental leave.
“The proof is in the pudding,” David said. “Abacus has taken a lot of steps to exemplify a firm who is authentically trying to make a difference.”
David says the biggest challenges in private wealth management tend to be internal, such as finding ways to grow from 20 to 70 employees. Client development, he says, comes from hard work.
“There’s no secret to client development, to bring in clients,” Dewolf said. “If there was an easy way, everyone would do it. Sometimes it just boils down to hard work and proving to people you’re an expert in your field and can be trusted.”
Abacus currently operates in Los Angeles, San Francisco Bay Area, and Philadelphia, and David’s firm manages over 2.5 billion dollars in private wealth. But this success did not come immediately out of college, and one of the most important pieces of advice he can communicate is to remain patient.
“Take the time, be patient, and spend a few years exposing yourself to the business world that’s out there,” David said. “Then you can zero in on what you’re passionate about.”
David’s other piece of advice for young Bruins? Learn to make sacrifices for your long-term future. Instead of trying to maximize the amount of parties you can attend in four years, you should focus on your professional development, which will yield better long run returns.
“What’s more important? Sacrificing a little fun for four years that can make the next 80 better, or be miserable for the next 84 years? Lay that foundation for the next 30 years of your career.”
Written by Andreas Papoutsis
Ariel Burstein
Economists have been studying the labor-market consequences of immigration for over three decades. The vast literature that has emerged has brought new theoretical perspectives to labor economics and new empirical approaches to modeling labor-market. What the literature has not produced is consensus about how labor markets respond to immigrant inflows. Which types of workers lose from immigration and which types gain? How have different regions faired in response to the arrival of large numbers of foreign-born workers?
Estimates of the impact of immigration on the wages of native-born workers appear to depend on how one defines the geographic scope of labor markets, skill groups within these labor markets, and the interchangeability of native- and foreign-born workers on the job. This variation in results suggests that there are features of regional or national labor markets that condition how they adjust to inflows of immigrant workers. Without a deeper understanding of these adjustment mechanisms, we cannot say how immigration affects regional or national labor-market outcomes.
Professors Ariel Burstein and Jonathan Vogel contribute to research on the labor-market consequences of immigration by marrying theoretical insights from international trade with empirical methods from labor economics. In a paper entitled “Tradability and the Labor-Market Impact of Immigration: Theory and Evidence from the U.S.,” they show empirically and theoretically how differences in the tradability of occupational services—think software programmers or manufacturing assembly-line workers as being on the tradable end, and dentists or janitors as being on the non-tradable end—create variation both within and between regions in how labor markets respond to an influx of immigrant workers. The more specialized a regional economy is in tradable activities, the more that economy can absorb an inflow of immigrant labor without creating strong pressures on local wages. For example, Silicon Valley can use the arrival of foreign-born engineers to expand its exports of IT services, the region may see only modest changes in its average wages following an immigration-induced increase in local labor supply.
As a result, native-born workers will vary in their exposure to immigration according how specialized their skills are in the occupations that attract foreign-born labor. A worker in construction, a sector with high immigrant presence, is likely to be more exposed to immigration inflows than is a worker in mail distribution, a sector with low immigrant presence. Burstein and Vogel’s project involve theoretical modeling of the U.S. economy, empirical estimation of the model using data on U.S. local labor markets, and quantitative modeling that characterizes impacts by region and occupation of counterfactual changes in U.S. immigration policy.
