Saturday, 16 January 2021

Free riding in the RePEc rankings

The RePEC (Research Papers in Economics) rankings are probably the most widely respected ranking of academic economists worldwide. You can see the New Zealand ranking (based on the last ten years) here. The University of Waikato is well represented - as I am writing, we have three of the top ten, and six of the top twenty, economists in the country. You have a scroll a little way down to find me (at #38).

The ranking is based purely on research publications and their quantity and quality, but only considers publications in economics journals (which in part explains why I'm not ranked higher - so many of my publications are in public health and interdisciplinary journals). Anyway, I'm sure there are ways to game the rankings, if one digs into the algorithm. And given that most economists watch these rankings, there is no doubt benefits to gaming the system if you know how to do so.

According to this 2018 article published in the journal Applied Economics Letters (ungated earlier version here), by Justus Meyer and Klaus Wohlrabe (both University of Munich), it is possible to free ride to some extent in the RePEc rankings. As they explain:

The ongoing procedure of measuring an author’s overall ranking is to adjust backwards for the publishing journal’s quality. RePEc currently adjusts by weighing an author’s publication by the publishing journal’s current impact factor (IF). Impact factors, however, change over time... The reweighting of old articles by current impact factors raises the chance of involuntary free-riding. Authors benefit through previous publications in journals that climb the quality ladder over time.

Does the re-weighting of journal quality make much difference? It turns out that yes, it does. Meyer and Wohlrabe re-rank all 45,000 authors in RePEc, re-weighting the quality of their journal publications by the impact factor during the year in which the article was published. They find that:

...the average change for the top 100 is −12 places and for the top 1000 is −40 place. Among the top 1000 authors ordered by the initial RePEc ranking, the biggest gain is an improvement of 510 places while another author drops by 1600 places.

Drilling down to the top 20 economists (by the ranking at the time of this research), the big gainers are Robert Barro (up 9 places to 11th) and Timothy Besley (up 8 places to 9th), while the big losers are John Siegfried (down 23 places to 34th) and John List (down 17 places to 26th).

Have Meyer and Wohlrabe identified a real problem though? It seems unlikely. Notice that this 'free riding' that they document involves economists anticipating which top journals will rise in impact factor in the future, and publishing in those journals. It seems unlikely that anyone has the perfect foresight necessary to free ride purposefully. So, I wouldn't read too much into the changes as a result of their re-weighting. It's probably not accurate to label future Nobel Prize winner John List a free rider just yet.

Thursday, 14 January 2021

The health impacts of criminalising prostitution

I've previously written about the positive impacts of decriminalising prostitution (see here and here). However, most studies on this have been conducted in developed countries. In a new article published in the Quarterly Journal of Economics (possibly ungated earlier version here), Lisa Cameron (University of Melbourne, and no relation to me), Jennifer Seager (George Washington University), and Manisha Shah (UCLA) look at a peculiar case in Indonesia. As they explain:

The study area encompasses the districts of Malang, Pasuruan, and Batu in East Java, Indonesia... As is common throughout Indonesia, sex work in East Java occurs in both formal worksites (i.e., brothels) and informal worksites (i.e., the street)...

On July 11, 2014, the Malang district government announced that on November 28, 2014, it would close all formal sex worksites within the district as a “birthday present” to Malang... 

The announcement of the worksite closures was unanticipated. To the best of our knowledge, when we conducted baseline surveys in February–March 2014, there was no expectation of the closures. In fact, we had considered conducting the research (which was originally planned to be a randomized controlled trial offering micro-savings products to sex workers) in Surabaya but had been advised by the community-based organization we were working with, whose main mission is to work with sex workers in the Malang area, that worksite closures were possible in Surabaya. We specifically selected Malang as our study site because worksite closures were not anticipated.

I guess this was a case of the researchers making the best of a bad situation. Cameron et al. started out intending to research one thing, but ended up researching something completely different (incidentally, there's been a lot of that over the last year, due to coronavirus lockdowns or just the pandemic generally).

Anyway, Cameron et al. had collected some baseline data before the criminalisation, and collected data after the criminalisation, allowing them to apply a difference-in-differences analysis. Essentially, this involves comparing the difference between Malang and the other two districts before criminalisation, with the difference between Malang and the other two districts after criminalisation. They find that:

...criminalizing sex work increases STI rates among sex workers (measured using biological test results) by 27.3 percentage points, or 58%, from baseline. Using data from both clients and sex workers, we show that the main mechanism driving the increase in STI [sexually transmitted infection] rates is a decrease in access to condoms, an increase in condom prices, and an increase in noncondom sex. Sex workers are more than 50 percentage points less likely to be able to produce a condom when asked by survey enumerators at endline, and clients report a 61 percentage point increase in noncondom sex.

None of that is good, and it extends to those that left sex work as well, and their children:

Using data obtained from tracking women who left sex work postcriminalization, we show that those who leave sex work because of criminalization have lower earnings than those who leave by choice. In addition, children of women from criminalized worksites are adversely affected—they have less money for school and are more likely to work to supplement household income.

The criminalisation also impacts the general population:

...there is a statistically significant... increase in female reports of experiencing STI symptoms in the past three months. This is consistent with a scenario in which increased STI rates among sex workers at the criminalized worksites translate into higher STI rates among clients, who then pass these STIs on to their sexual partners.

The sex market was smaller as a result of criminalisation, which was the intention of the policy. However, the unintended consequences are severe. As Cameron et al. conclude:

...from a health perspective, criminalization of sex work is likely to be counterproductive.

Indeed.

[HT: Marginal Revolution, for the working paper version last year]

Read more:

Wednesday, 13 January 2021

Book review: The Instant Economist

What are the key economic concepts that a manager needs to understand? That is the question that is answered in The Instant Economist, a 1985 book by John Charles Pool and Ross La Roe. This is a pop-economics book from a time when pop-economics didn't really exist as a concept. Nevertheless, it has aged really well, and is not to be confused with the 2012 book of the same title by Timothy Taylor (which I reviewed here a few years ago).

Pool and La Roe cover concepts from macroeconomics, microeconomics, and international economics, pulling out the key things that a manager needs to understand in each area, and explaining them in a quite straightforward way. The narrative style is the story of an MBA graduate whose father has sent him to talk to an economics professor because, while he understands all of the maths, he doesn't understand any of the economic intuition from his business degree. Regular readers of this blog will probably realise that is a setup I have a lot of sympathy for. Clearly though, the book was written for a different time - the professor's lunch consists only of two martinis at the staff club, just before he heads in to teach a graduate managerial economics class!

I found the microeconomics section to be particularly useful and still current. The macroeconomics is a bit dated and even the simple models of macroeconomics have moved on a bit from how Pool and La Roe write about it. The 'bathtub model' of macroeconomics was an interesting device, but probably wouldn't stand up to much scrutiny now. The international economics section is more-or-less limited to exchange rates, international investment flows, and the gains from trade.

This was a really good book, and I enjoyed it a lot. It also gave me some ideas on framing the importance of elasticities in particular for management students. Recommended!

Tuesday, 12 January 2021

No, economic growth won't save us from the increasing fiscal costs of population ageing

Last week I wrote a post about ageing and creating tax incentives for older people to work longer. The impetus for the tax incentives is the projected increase in the older population, and reductions in support ratios (the number of working people for each older person). However, the issue may not be as bad as assumed by most people (including me).

This new article by Ian McDonald (University of Melbourne), published in the journal Australian Economic Review (sorry I don't see an ungated version online) tells a different story. McDonald first outlines the problem:

The likely prospect of an ageing population, that is, an increase in the share of old people in the population, will put upward pressure on the level of government expenditure in the future. High government expenditures per old person multiplied by the increase in the proportion of old people in the population will drive an increase in government expenditure. This is a major fiscal challenge which we are starting to experience.

He then goes on to summarise projections of government spending, based on assumptions about population growth, and an assumption of unchanged government policy (which is a standard assumption - we can't easily forecast what future government policy may be). He finds that various projections (by McDonald himself, and others):

...suggest that an increase in government spending due to the ageing population somewhere in the range of 4.9–7.8 percentage points of GDP over the 40‐year period seems to be a reasonable projection assuming unchanged government policy.

So, essentially the government would need to either increase spending by 4.9-7.8 percentage points of GDP. McDonald seems to suggest this is not a big deal, but given that government spending in Australia is around 40 percent of GDP, that would entail a 12-20% increase in government spending. That means taxes would need to be 12-20% higher than currently, or government services (or service quality) would need to be cut to compensate for the extra spending.

McDonald's argument that the costs are not prohibitive rests on this:

The prospect of an increasing proportion of old people raises the spectre that our continuing support will be impossible. However, this fear ignores the fact that because of the continuing growth of labour productivity, we who will finance this support will be better off than we are today and will indeed be well able to support older people.

Specifically, he finds that the increase in government spending required for the ageing population is dwarfed by the increase in GDP itself. I don't find this argument entirely persuasive, because if taxpayers were happy to give up some proportion of their income growth in higher taxes, the government could do that right now. In fact, governments tend to be moving in the opposite direction, decreasing taxes even though income per capita is increasing. That suggests that there is already an unwillingness, either by taxpayers or by government, to increase taxes to offset increased costs due to ageing.

I don't think you can just wave your hands, cite 'economic growth', and 'poof!' - all problems relating to the increasing costs of an ageing population disappear. And that appears to be what McDonald is doing. Which is disappointing - I usually like the 'For the Student' section of the Australian Economic Review, but this is one article that falls short of the mark.