Marek Pycia wins Scoville Teaching Award

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The department would like to congratulate Marek Pycia for winning the Warren C. Scoville Distinguished Teaching Award for excellence in undergraduate teaching.

Professor Pycia’s Econ 106D course discusses the design and use of markets and other institutions to solve problems of matching markets and resource allocation.  The course uses both theory and case studies to help students understand how the design of markets can have substantial effects on the efficiency and fairness of outcomes. Congratulations Marek on winning the award!

 

 

The Asymmetric Impact of Taxes on Prices

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Youssef Benzarti

Value Added Taxes (VAT) don’t exist in the US but they are actually one of the most important and powerful forms of taxation. They are in fact so powerful that they have been labeled the “money making machine”. In European countries, they raise 30% of total tax revenue, which amounts to 12% of GDP. VATs exist in every single developed country and were introduced in 160 countries over the past 50 years. In spite of the importance of VATs, there is very little research investigating them

In “What Goes Up May Not Come Down: the Asymmetric Incidence of Value Added Taxes”, Professor Youssef Benzarti explores the effect of changes in VAT rates on prices. He finds something surprising: when VAT rates increases, prices inclusive of the VAT rate tend to increase to compensate for higher VAT rates; however when VAT rates decreases prices inclusive of VAT remain constant. This implies that firms tend to benefit from VAT cuts, but it is consumers who pay for VAT increases.

Some Governments use temporary VAT cuts to stimulate demand. This research implies that because prices tend not adjust downwards, temporary VAT cuts are not a good measure to stimulate demand. They are desirable if Governments want to stimulate supply by providing them with a transfer of money. However, ultimately Governments cannot control what firms will do with the windfall of money they receive as they can distribute it to their shareholders with no direct benefits to the economy.

Second, if VAT cuts are temporary and are supposed to be repealed once the economy recovers, the asymmetric pass-through suggests that this might result in a higher equilibrium price and will end up being paid for by consumers. As an illustrative example, assume a VAT cut of 10 percent that lasts three years. If firms pass through 50 percent of the VAT decrease but 100 percent of the VAT increase, then firms will receive a permanent windfall of 50 percent of the VAT decrease, consumers a three year long windfall of 50% which will be paid for by the Government through lower taxes. But once the VAT rate is increased, will stop receiving the 50 percent windfall and instead will start paying for the 50 percent windfall that firms are receiving through higher equilibrium prices. For this reason, a temporary VAT cut can hinder the demand side and is only desirable if the Government wants to permanently transfer money from consumers to firms.

Simon Board and Andres Santos announced as Editors

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This summer, Professor Simon Board became Coeditor of Theoretical Economics and Professor Andres Santos became Coeditor of Quantitative Economics. These are leading journals in theoretical and empirical economics, and operate under the umbrella of the Econometric Society. They are also open access.

Professor Moritz Meyer-ter-Vehn has also become the Associate Editor at the Journal of Economic Theory, a leading journal in economic theory.

Michela Giorcelli awarded Grant in Innovation Policy

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Professor Michela Giorcelli was awarded the NBER Small Grant in Innovation Policy with Professor Nicola Lacetera for their project on “Public Disclosure and the Evolution of Science and Technology: A text Analysis Approach”. This project seeks to understand the relationship between the quality and success of scientific discoveries, and the public perception, understanding and ultimate acceptance. To evaluate the public’s view of innovations, Professor Giorcelli uses text analysis to study a large amount of historic data over the past century.

If you would like to assist Professor Giorcelli in her work, you can donate here.

LA Times article on the stock market features interview with Lee Ohanian

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In a recent article in the business section of the Los Angeles Times titled “The Fed took bold steps to books the economy.  Will undoing one of them rattle markets?”, UCLA’s Lee Ohanian was asked what he thought about the moved the Fed had made.

The article discusses how the Federal Reserve bought up trillions of dollars in bonds following the 2007-08 financial collapse, but is now preparing to scale back its massive investment of about $4.5 trillion in assets.  When Lee Ohanian was asked what he thinks of the Fed’s initial bailout, he points out that most studies have indicated that the Fed’s bond purchases lowered long-term rates between 0.25 and 0.75 percentage points, and that the effect was modest.

 

 

Kidney Vouchers

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Marek Pycia

Until recently, if someone wanted to donate a kidney to a family member or a friend, the recipient would receive the kidney at the time of the donation, or very close to this time. This timing restriction created a problem for Howard Broadman, a retired California judge. Judge Broadman wanted to donate a kidney to his grandson, who, however, did not need the kidney yet, but was likely to need one in 10 to 15 years, at a time when Broadman might be too old to donate. Judge Broadman approached UCLA and proposed to donate the kidney for a promise (a voucher) that his grandson will have priority to receive a kidney when he needs one.

A system of kidney vouchers that builds on Judge Broadman’s case was subsequently developed by Professor Marek Pycia and other members of an interdisciplinary team including Jeffrey Veal from UCLA David Geffen School of Medicine, other UCLA, USC, and Cornell medical practitioners, and Alexander Capron from USC Law. This system— described in their recent paper “Vouchers for Future Kidney Transplants to Overcome ‘Chronological Incompatibility’ Between Living Donors and Recipients”—is already being used to organize promises of priority for future kidney transplants.

Kidney vouchers need to be legal: for instance, in the US it is illegal to trade a kidney for money or other valuable consideration, and for this reason each kidney voucher is issued in the name of a particular recipient and cannot be used by anyone else. The system also needs to be sustainable: it needs to ensure that the hospitals in the system are able to offer kidneys to voucher holders, when they need transplants and come to redeem their vouchers.

Sustainability is where economics enters the picture. The voucher system resembles a retirement system such as US Social Security. Each time a kidney voucher is issued, one more kidney can be transplanted to someone waiting for it. Later, however, when the voucher is redeemed, a kidney is needed for the voucher holder. The system is sustainable provided the number of donations into the voucher system stays constant or is growing.

Each new voucher allows the participating hospitals to initiate a chain of transplantations, in which a first patient receives the kidney donated for a voucher, a second patient receives the first patient’s donor’s kidney, etc. This chain provides an opportunity to honor a previously issued voucher by transplanting the last kidney in the chain to a patient redeeming the voucher. At the same time, the chain enables several patients with incompatible donors to receive a kidney, and thus not only patients with vouchers benefit but also an average patient without a voucher faces a shorter wait time.

The system, started recently at UCLA, is quickly gaining popularity. By now, over twenty leading US transplant centers joined it, and, in addition to Judge Broadman, over ten donors donated kidneys to give vouchers to their close ones and protect them against the consequences of anticipated kidney failure.

The paper, ahead of print at Transplantation, is available electronically, and kidney vouchers were featured in the Boston Globe, CBS, Fox News, Reuters, USA Today, Wall Street Journal, and many other outlets.

Gary Ghazarian

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Gary Ghazarian

The allure of the investment industry has long attracted numerous successful UCLA alumni. For Gary Ghazarian, it was no exception. With over 25 years’ experience in the field, he currently serves as the Director of Operations for Marketable Securities at leading alternative investment firm Kayne Anderson Capital Advisors. Having pursued a degree in Economics at UCLA, he fondly recalls his memories here; sitting at the front row of almost every basketball game, scoring the first goal in IM soccer for the Armenian Student Association, and most of all, meeting his wife while working part-time on campus in his senior year.

Gary’s foray into the field of investment management began when he found a stockbroker internship from the job postings listed at the campus career center. Ironically, the day he called inquiring about the internship was Black Monday in 1987 when the market was down over 20%. It is his firm belief that with disruption comes opportunity and that we should use these opportunities to add value where we can.

Recalling the limited number of job openings in competitive firms, he stresses the importance of networking. Networking allowed him to hone his interpersonal skills, and, combined with his specialized skill set, has enabled him to win the trust of clients while opening new doors. His advice to young Bruins is to reach out to UCLA alumni, including himself and his colleagues, who are more than happy to let students do informational interviews and ask questions they may have about the field.

After furthering his education with an MBA degree in corporate finance, Gary went on to work at the investment consulting firm Wilshire Associates. After several years at Wilshire an opportunity arose at a client firm – Kayne Anderson Rudnick, which is a traditional and conservative equity management firm. After a few years there, he went on to work for Kayne Anderson Capital Advisors, which was formerly affiliated with Kayne Anderson Rudnick. He described the move by saying, “They told me they were growing rapidly and that they needed help on how to go about it. So they basically asked me to come over, figure out what needed to be done, and do it”. He states that the variety of issues that arise is what makes his day interesting and fascinating. Moreover, he shares that in fast moving markets it is crucial to be able to multitask and prioritize – a skill that comes with years spent on the time-pressured UCLA quarter system.

Above all, Gary shows the spirit of a True Bruin as he proudly speaks of his role in supporting UCLA Operation Mend – which provides intensive reconstructive surgery and physiological and psychological medical treatment to post-9/11 veterans free of charge – both financially and personally as a volunteer in their “Buddy Program”. He and Kayne Anderson’s charitable foundation were recognized in Congress by Representative Julia Brownley for their support of veterans.

 

-By Natsharee Pulkes, UCLA Undergraduate

UCLA Welcomes Three New Faculty Members

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The UCLA Economics Department is very happy to be joined by three new faculty this year.

 

Volker Nocke

Volker Nocke joins us from Mannheim as a Full Professor. Professor Nocke is an expert in Industrial Economics and International Trade. Much of his recent work has been concerned with mergers and competition policy. He has published in the American Economic Review, Journal of Political Economy, and Review of Economic Studies. He previously held positions at the Universities of Pennsylvania and Oxford.

 

Jonathan Vogel

Jonathan Vogel joins us from Columbia University as a Full Professor. Professor Vogel is an expert in International Trade. His recent work studies the skill premium and immigration in the context of trade. He has published in the Journal of Political Economy, Quarterly Journal of Economics, and Review of Economic Studies. After obtaining his Ph.D. from Princeton, Professor Vogel joined UCLA as an Assistant Professor. We welcome him back!

 

 

Katherine Meckel

Katherine Meckel joins us from Texas A&M as an Assistant Professor. Professor Meckel’s research studies the design of public policies, including Medicaid and nutrition assistance. She recently graduated from Columbia University and spent 2015-16 as a post-doc at the University of Chicago.

 

 

On a less fortunate note, Leah Boustan left the Department for Princeton after more than a decade at UCLA. We wish her the best of luck in her future endeavors.

Kathleen McGarry on U.S. Labor Force Participation

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For the long term health of Social Security, it it important to make projections about future participation in the U.S. labor force. To understand this further, the Social Security Advisory Board appointed a Technical Panel of prominent labor economists that includes UCLA Professor, Kathleen McGarry.

The final report shows that the secular decrease in participation rates for men, and a similarly-sized increase for women. It also shows the reduction in participation that occurred during the great recession, accounting for changes in the age structure of the population.

Below is the official announcement.

 

Board Releases Final Report of the Technical Panel on Labor Force Projections

 

 To coincide with the publication of the 2017 Social Security Trustees Report, the Social Security Advisory Board is pleased to announce the availability of the Final Report of the Technical Panel on Labor Force Projections.

 

The Panel, comprised of five prominent labor economists commissioned by the Board in mid-2016, evaluated the assumptions and methods used by the Office of the Chief Actuary to project labor force participation rates–a key factor in the determination of revenues and expenditures of the Social Security programs. The Panel’s report includes several recommendations for how those projections could be improved.

 

The Trustees’ annual estimates are indispensable to understanding the financial well-being of the nation’s most important social insurance program. They serve as the basis for evaluating the financial effects of policy reforms. The Board believes that careful scrutiny by an independent panel of experts helps assure the public that the projections are based on the best insight and information available and on the unbiased work of dedicated professionals. This is the sixth panel sponsored by the Board.

 

Read the Final Report of the Panel and explore data and other material submitted to the Panel as well as a response to the Panel’s recommendation from the Office of the Chief Actuary.

 

Read the 2017 Trustees Report

 

The Technical Panel on Labor Force Participation was chaired by Robert A. Moffitt, Krieger-Eisenhower Professor of Economics at Johns Hopkins University, and included Gary Burtless, John C. and Nancy D. Whitehead Senior Fellow at the Brookings Institution; Chinhui Juhn, Henry Graham Professor of Economics at the University of Houston; Kevin M. Murphy, George J. Stigler Distinguished Service Professor of Economics in the Department of Economics and Graduate School of Business, University of Chicago; and Kathleen McGarry, Professor of Economics at UCLA.