Relevant and even prescient commentary on news, politics and the economy.

NAWRU constructive (?) proposals

I have vigorously criticized the European Community DG EcFin approach to estimating the non accelerating wage inflation rate of unemployment (NAWRU). This is a step in their estimation of output gaps, which, in turn, are used to set allowed deficits for member countries under the Stability and Growth Pact. The calculations are critically important.
Marco Fioramanti and I think the DG EcFin approach (technically agreed with member governments) is not defensible.

I have two thoughts about how NAWRU should be estimated. One is a proposed modification of the current state space model. The other is more radical: it is to calculate NAWRU as a function of data without allowing unexplained variation at all.

1) a modest proposal

a) The problems with the currently agreed procudure based on a Kalman filter.
The current estimates of NAWRU depend critically on arbitrary restrictions on parameters. The restrictions are imposed ad hoc. Relaxing them leads to NAWRU estimates which are very different than the official estimates. The importance of the unmotivated restrictions is demonstrated by the fact that extremely similar estimates of trend unemployment are usually (for n of 28 countries ) obtained without any use of data on wage inflation simply as a trend-cycle decomposition of the univariate unemployment series given the restrictions on parameters. The arbitrary restrictions are different for different EU countries and are changed from year to year (without any motivation or explanation of the change). This means that estimated output gaps depend critically on arbitrary decisions made by people who should act as technicians.

The assertion that unemployment can be decomposed into a stationary and non-stationary components is not a testable hypothesis. Theory does not guide the specification of the non stationary component at all. There is no reason to expect that it is unaffected by fiscal policy and no justification for taking it as exogenous and given when setting fiscal policy.

It would be much better if there were simpler uniform limits on the time series models which can be clearly explained and motivated and which are not changed at will.
I think the key problem is that, for some reason, NAWRU is modelled as a second order random walk, so the drift term is itself a random walk. There is no motivation for this approach. It has no relationship with any existing model of unemployment — the original natural rate of unemployment hypothesis had no place for unexplained variations in the natural rate — only variations due to changes in labour market institutions were allowed. The second order random walk model is not taken seriously. It is used to decompose unemployment into NAWRU and cyclically adjusted unemployment, but it is not used to forecast future unemployment. A key principal of standard time series economics is that time series models are evaluated based on their ability to forecast accurately out of sample. Contradictory assumptions about the same time series for different purposes are not usually allowed.

Importantly the choice to model NAWRU as a second order random walk is not based on empirical evidence. For most (n of 28) countries, the estimated variance of the disturbance to the drift (the so called “slope variance” is zero if restrictions are not imposed on parameters. For (n of 28) countries a binding lower bound on this parameter estimate is imposed — in effect the parameter is set by hand arbitrarily. For another (m of 28) the parameter estimate is positive only because binding upper bounds are imposed on other variances.

It seems to me clear that this parameter should be set to zero, so NAWRU should be modelled as a first order random walk (as it currently is for Slovenia). There is no theoretical motivation for assuming stochastic drift. The data, if allowed, usually yield 0 as an estimate. The implications of varying drift are absurd . The model with varying drift is not used for out of sample forecasting. All arguments I have read which defend the current approach are vague and essentially appeal to the judgment of appointed experts.

I conclude that, if NAWRU is modelled as an indirectly observed state, it should be modelled as a first order random walk. I can’t think of any defence of the second order random walk model.

b) Problems with freely estimate parameters

I don’t know or care why the second order random walk specification was originally chosen. However, it is easy to see why first order random walk estimates are unappealing (so estimates where a slope disturbance is allowed but freely estimated and estimated to be zero are unappealing). Given the general increase in unemployment in most EU countries, a large positive drift is estimated. For many countries, freely estimated NAWRU is a deterministic trend (or nearly a deterministic trend). Given the theoretical model of NAWRU as function of labour market institutions this is implausible. I personally find it implausible. The natural reaction to this prior belief that dramatic positive drift is implausible is to restrict the drift parameter to zero. That is to model NAWRU as a first order random walk without drift. To do this is to say that we have no sense we can forecast of the sign of the change in NAWRU from AD 3000 to 3010.

Setting the drift to zero is very different from relaxing arbitrary restrictions on estimated variances. It is a restriction no relaxation of a restriction. It implies a lower likelihood not a higher likelihood. It is based on theory, but the theory consists of simplifying assumptions made about trends by economists who want to focus on cycles. I think the drift in NAWRU should be set to zero, but I can see why others might be sincerely unconvinced.

The Phillips curve with NAWRU assumed to be a first order random walk without drift remains poorly identified. The problem is that data on wages (or real unit labour costs) provide no information about the variance of the disturbance to cyclical unemployment. If cyclical unemployment is multipled by 10 and the phillips curve parameters are divided by 10, then the forecasts of wage inflation aren’t changed at all. Wihtout restictions on parameters, the Phillips curve gives no information on the magnitude of the distubances to cyclical unemployment and the NAWRU. This explains the attraction of arbitrary restrictions on estimated variances. I personally think it is reasonable to impose (sometimes binding) lower bounds on the variance of the disturbance to cyclical unemployment and the NAWRU. I think it is very important, as a matter of fairness, to impose the same arbitrary limts on parameters estimated for different countries. I certainly think that the restictions should be chosen a priori and not changed ad hoc. To be specific I propose 0.1 %2 as a lower bound on both estimated variances.

c) preliminary conclusion

I think that the proposed model in which NAWRU is assumed to be a random walk without drift with variance the greater of the free estimate and 0.1 %2 and cylical unemployment a stationary AR(2) with a distubrance with variance the greater of the free estimate and would be a huge improvement on the existing approach. The model could be used for non absurd out of sample forecasts. The time series behavior of NAWRU in the model corresponds to the time series behavior of the natural rate of unemployment in the theoretical literature. The arbitrary restictions are simple, constant and the same for all EU countries. They can (and must) be clearly and prominently stated.

A more radical proposal after the jump

Comments (0) | |

Democrats in Array

The hardy perennial “Democrat’s circular firing squad is in disarray” story line is looking a bit withered. During the whole dramatic absurd Trumpcare drama (so far Trumpcare is a zombie which can’t be killed) ALL 48 Democratic senators remained united. In 2016 the new Clinton adopted a neo-neo-liberal platform which was actually liberal.

However, some people refuse to let it go. I am one of those people.

update Charlie Pierce is another one, and he can write. Click this link for the post I wish I had written
end update

I want to whine about this informative and well written article by Ryan Cooper
“Why leftists don’t trust Kamala Harris, Cory Booker, and Deval Patrick”. Cooper wrote in the third person discussing leftists without presenting himself as one. He left me tempted to title this post “”Leftist Democratism” as an infantile disorder”. His key point is that leftists value style over substance “Second, and perhaps more importantly, they need to make a symbolic rhetorical break with the despised donor class. ” Cooper’s point is that the (un-named and unquoted leftists who clearly include someone named Cooper) care more about style than policy proposals.

I find this frustrating, but admit that it makes political sense. The 2016 election was, among other things, a triumph of style over substance. Trump won some votes of people who wanted to move left from Obama. His proposal to slash the taxes on the rich was less important to them than his fake populist tone. I find myself on the left wing of the Democratic party and agree that anti-banker rhetoric is a key part of Democrats’ best strategy.

On the other hand, factional purism and focusing on small differences within the party is not. Cooper explains suspicion of Harris because she did not prosecute OneWest (treasury secretary Mnuchin’s firm with a business plan based on maximizing foreclosures and subsidies from the FDIC). Here the point is that one should only prosecute if one has a reasonable chance of winning and being a jerk is not a crime. Corry Booker is suspected for having said (years ago) that Obama’s criticism of Wall Street was too harsh (yes outrageously extreme moderation — but just a youthful discretion).

I suspect that a lot of “the left” is suspicious of anyone who is not named Bernard Sanders. I also think that they are focused on uniting against the common enemy the Judean People’s Front the party establishment.

There is, certainly, a good bit of mutual pointless hostility. I hope there is not much to the effort to keep the circular firing squad tradition alive.

Comments (14) | |

What is Socialism (contagion from Twitter)

So @atrios tweeted asking for a definition of socialism in 140 characters or less. Being a fool, I tweeted “Means of production controlled by people elected with one person one vote”

Many people objected that all states which say they are socialist are also not democratic. I need more than 140 characters to explain my definition & impose on your patience.

First a definition must be true of all examples of the set defined & not true of any exceptions. Whatever socialism might be, it is a fairly new concept (I cite the infallible Pope and the encyclicl “Rerum Novum” literally “new things” & all about socialism). Any absolute monarch owns everything including all of the means of production. Ramses II was not a socialist. I think any reasonable definition of socialism implies that “democratic socialism” is redundant.

Some commenters asserted that democratic socialism is impossible, so, by my definition, socialism is impossible. I concede for the sake of argument that they are correct. So what ? I could also define “perpetual motion machine” or “pegasus”. Defining a word does not imply the assertion that it names something which has actually existed or could exist.

Others assumed that, by defining socialism as democratic, I must be advocating it. in fact, I think that socialism is a bad approach to managing the means of production.

From that concession a very polite and intelligent tweeter concluded I was a libertarian. I said I prefer a mixed system which is not socialist but is closer to socialism than, say, the current USA (an aside why am I talking about a country 3000 miles away — well I am looking at a petrochemical plant built which isn’t actually producing anything, built with public subsidies to a crooked businessman who paid the second largest bribe in Italian history and damnit I’m on vacation and I will. not. think. about the Italian economy or how a mixed economy can get all mixed up.)

So to conclude. It makes no sense to define socialism as state control of the means of production. That would imply that all absolute monarchs are socialists. One can define something as democratic without praising it (electing Ronald Reagan was clearly democratic). One can define something without asserting it is stable or can last for a long time in the real world. I think socialism is utopian and I don’t agree with Paul Ryan.

I am addicted to twitter but have profound doubts about a medium in which the concepts explained above are too complicated to express.

Comments (2) | |

US Public Support for Medicaid

Prominent among the things that the out of touch elite knows about regular Americans in, say Kansas where something is the matter, is that those people oppose means tested programs almost as much as they support Social Security old age and survivor benefits and Medicare.

(Another used to be that the didn’t support higher taxes on high income people. One of my angrybear obsessions was noting the solid to overwhelming majorities in all polls dating back to 1992 who have told Gallup that “upper income people” pay less than their fair share of taxes (search for Gallup here). For roughly a decade, I have been a voice crying out in a crowded room as the fact has become too obvious to deny.)

Now Kate Zernike & Abby Goodnough at the New York Times have noted the overwhelming support for means tested Medicaid (both the ACA expansion and legacy Medicaid).
update: I should write that I think the article is excellent. I object to one clause in the article.
End update:

But even when reporting the fact, they repeat the old falsehood asserting “The shift in mood also reflects a strong increase in support for Medicaid, ”

Now the mood certainly includes overwhelming support for Medicaid. The claim that this is an increase from previous lower levels is not supported by evidence presented in the article. There is the problem that, in plain English, high and increased are used as synonyms (that is people are generally innumerate about levels and changes). But, I think, it is also true that a plain fact clearly demonstrated in poll after poll has been denied by members of the out of touch elite. Here I think highly educated urban liberals assume most of our countrymen are savage reactionaries. Also political reporters talk to Republican operatives a lot and Republican operatives both live in the conservabubble and lie shamelessly.

In any case, US public support for Medicaid has been overwhelming for many years (always click and search for Medicaid)

In 2012 the fraction who found Medicaid cuts acceptable was a Kung Fu Monkey + 1 28%

“In order to strike a budget deal that avoids the so-called fiscal cliff, would you accept cutting spending on Medicaid, which is the government health insurance program for the poor, or is this something you would find unacceptable?” 12/13-16/12

Accept 28%
Unacceptable 68 %
Unsure 3%

On the stronger position “favor” not just “accept” Bloomberg found that cuts to Medicaid crushed the Kung Fu Monkey Crazification limit

“Cut Medicaid, which is government help for medical care for low-income people”


Favor 22 %
Oppose 74 %
unsure 4 %

McClatchy Marist found an almost Kung Fu Monkey crazy 26% in favor

“Cut spending for Medicaid”


Favor 26
Oppose 70
Unsure 4

With middle choice cut some but not a lot United Technologies got 35% support.

All these polls address the fiscal cliff. They were taken roughly four and one half years ago. They show support for cutting Medicaid very similar to support for the AHCA and BCRA in recent polls.

Back when the ACA passed, support for Medicaid expansion wasn’t as overwhelming as opposition to Medicaid cuts (it was a polarized debate and it is true that it is easier to refrain from giving than to take back once given). Still there was always at least plurality support for Medicaid expansion (even in the context of Medicare cuts).

23% support for Medicaid cuts (34% for increases when discussed in the context of the budget).

In particular, the pattern makes it very cleat that hatred of “welfare” isn’t hatred of welfare as defined by economists. I don’t know of much polling, but I certainly don’t know of much public opposition to disability pensions.

There has been overwhelming opposition to Medicaid cuts for many years. Public support for Medicaid is slighly lower than public support for Medicare, but basically feelings about the two programs are similar. This fact doesn’t fit the narrative, so the fact was surpressed.

The hatred of “welfare” is based on racism and not on any particular program or belief about incentives or anything else. In context “welfare” means “Money for black people”. The pattern in public opinion polling makes this almost undeniable.

I’m going to try to avoid discussing the implications for the argument that social insurance is politically feasible while redistribution isn’t. I can’t help noting that I consider this hypothesis to have been rejected by the data.

Comments (15) | |

Some Thoughts on ACA and BCRA

I’m not sure if this is worth posting here, but I have some thoughts on health care reform reform.

The Republican arguments have become absurd in interesting ways.

HHS secretary Price said something which makes no sense: “the Senate health care bill strengthens and secures Medicaid for the neediest in our society,” putting the program, which serves more than 70 million low-income people, on “a path to long-term sustainability.”

Republicans regularly describe cuts to Social Security pensions or Medicare benefits as needed to “strengthen and secure” those programs. In those cases, the argument isn’t absurd, because OASDI and Medicare plan A have trust funds which might run out. It makes no sense in the case of Medicaid which is financed by general revenues. I think the dedicated financial streams and trust funds make Social Security and Medicare vulnerable. It is possible to convince people that the trust funds reaching zero will cause something like the bankruptcy of a firm (and also people tend to assume that claims on bankrupt firms are worthless when historical recovery ratios average around 70 cents on the dollar).

The argument for dedicated taxes and trust funds, which I have read here among other places, is that otherwise the programs are like welfare and would be unpopular. The massives support for Medicaid demonstrated now that Republicans are trying to cut it undermines this argument.

Also in the same article Sen Cornyn flat out lies “Mr. Cornyn acknowledged that “there’s uncertainty about what the final outcome will be.” Asked what would happen if the bill did not pass, he said: “I assume we’ll keep trying. But at some point, at some point, if Democrats won’t participate in the process, then we’re going to have to come up with a different plan.” Of course Democrats have begged to participate in the process and have been excluded by Republicans. Robert Pear quoted the lie without noting that it is false. I think this is bad journalism. Also Cornyn is hinting that they might have to (shudder) try bipartisan negotiation. His statement would only make any sense if it were rephrased “If Democrats will participate in the process”. “Keep trying” means keep trying to pass a bill while completely excluding all Democrats. Cornyn is admitting that it was a mistake to be 100% partisan. He wants to blame the Democrats. The result is not just a lie, it is garbled nonsense based on a lie.

Finally Rand Paul is insane. He actually said “it keeps the fundamental flaw of Obamacare. It keeps the insurance mandates that cause the prices to rise, which chase young, healthy people out of the marketplace and leads to what people call adverse selection, where you have a sicker and sicker insurance pool and the premiums keep rising through the roof.” This is so crazy that I can’t think of a reply. All the claims are false — the BCRA would lead to adverse selection, because they eliminate the mandates. The idea that mandates cause selection is plainly insane. It is hard to understand how the statement could be generated by a human brain. And the ACA might survive because of that nutcase. Insane extremism causes sane policy in Bizarro World.

Comments (16) | |

Bizarro World

At least 40 Republican Senators and possibly the critical 50 have decided to stand up to the lobbyists, the interest groups and big business. They are willing to vote for the Cruz amended BCRA which would not just repeal Obamacare, but also destroy US individual market health insurance. If they do so, they stand up to many of the most powerful lobbies including the AMA and the AARP (but not the NRA or AIPAC). Most importantly, they reject the very firm claims and fierce arguments of the relevant health insurance industry lobby AHIP

AHIP (and BCBS) wrote an extraodinarily passionate and detailed letter to the Senate which included “this provision will lead to far fewer, if any, coverage options for consumers who purchase their plan in the individual market. As a result, millions of more individuals will become uninsured.” Notice the future indicative (which I will never ever use). The claim is definite and made with absolute confidence. They express 100% confidence that enacting the reform (with the Cruz amendment) will cause a disaster.

The amazing thing is that AHIP is demanding that its members be regulated. They are asserting that they will damage the country if allowed ““As healthy people move to the less-regulated plans, those with significant medical needs will have no choice but to stay in the comprehensive plans, and premiums will skyrocket for people with preexisting conditions”. This correctly asserts that AHIP members will cherry pick if they are allowed to. AHIP correctly assumes that AHIP members will destroy the health insurance system for short term gain if allowed. It’s like a serial killer cherry picker writing “stop me before I medically underwrite again”.

It is bizarre for an industry to demand regulation to protect consumers from them. The suspicion must be that the concern for the general public is an excuse for support for regulation which helps incumbents or limits competition. The second Bizarre thing is that I personally don’t doubt the sincerity of the lobbyists advocating regulation in the public interest of the members of the lobby. For one thing, their claims are obviously correct and at least an overwhelming majority of independent experts agree. In fact, I haven’t read a defence of the Cruz amendment by ultra hack Avik Roy (I think there is one by uber hack Stephen Moore). I don’t think that an honest case can be made that an industry lobby isn’t sincerely acting (this time) in what it’s officers consider to be the public interest.

But strangeness beyond strangeness, it seems possible that 50 GOP Senators will ignore all serious independent analysis and all of the relevant interest groups. I don’t recall the last time so many Republicans seriously considered standing up to big business. I don’t think it is really surprising that Republicans finally say no to an interest group when that interest group says the public must be protected from the socially damaging profit seeking which shareholders will fore on them.

Everything is updide down in Bizarro World.

Comments (32) | |

three bad ideas which I think would be political winners for Democrats

Matthew Yglesias commands,
I obey. Now I just have to come up with three bad ideas.

1) $25 minimum wage. I am not sure about the $15 dollar proposal. I’m pretty sure that $25 would be too high. I guess it would be popular too.

2) Protection that’s what you’re here for . I am sure that total protectionism is a bad idea, and hinting at it worked pretty well for Trump.

3) Eliminate all taxes on the lower 99%.

I tend to wonder if maybe this isn’t such a bad idea, but I suspect that it would imply either huge deficits, undesireable cuts to Federal spending, or taxes on the top 1% which are higher than optimal.

In any case, I am rock solid certain that many Republicans are sure that Democrats are soon going to propose this and win all future elections. They wouldn’t argue against class warfare in the complete absense of any class warfare (except for theirs on behalf of the rich) if they weren’t terrified.

4) I would say health care reform with coverage of pre-existing conditions, gauranteed issue, Community rating and no mandate (to promise all the nice things without the necessary costs and destroy the individual insurance market entirely) except that Obama has already done that (the Barack Hussein Obama Jr was elected president of the USA, so don’t even think of tyring to tell me that bad policy is bad politics).

Comments (3) | |

Chait vs Roy on Baicker not really vs Baicker

Jon Chait has a brilliantly ruthless takedown of the absurd defences of the AHCA (house obamacare replacement) and BCRA (Senate version) . His main point is that Republicans are lying claimiing the huge cuts to Medicaid aren’t cuts to Medicaid and that the huge increase in the number of uninsured will actually be zero.

He also criticizes Avik Roy. This quarrel has become very interesting. Roy praised the BRCA. He refused to answer when Chait asked if he had also written it. Roy will not say if he is commenting on his own work without noting the conflict of interest.

Jonathan Chait‏Verified account @jonathanchait
Update: @avik tells me his policy is to not disclose his role in crafting legislation.

Chait notes that Roy praises the bill for increasing deductibles and also notes that Republicans denounced the Obamacare deductibles — for being too high. This just shows hypocrisy ( ok psychopathic dishonesty) or GOP politiicians. I’m sure Roy believes dedcutibles should be high, and Republicans in Congress have revealed a preference for high deductibles.

Chait also objects to Roy’s claim that Medicaid doesn’t cause improved health. Interestingly I had the same debate with someone on twitter yesterday. In both debates, the case against Medicaid is based on a citation of Baicker et al (2013) the report on the Oregon Medicaid experiment.

Chait (and I) responded by citing Somers Gawande and Baicker (2017) who wrote

Insurance coverage increases access to care and improves a wide range of health outcomes. Arguing that health insurance coverage doesn’t improve health is simply
inconsistent with the evidence.


One head-to-head quasi-experimental study of Medicaid versus private insurance, based on Arkansas’s decision to use ACA dollars
to buy private coverage for low-income adults, found minimal differences.11

So is it Chait’s experts against Roy’s experts ?

Not at all. Roy bases his argument on Baicker et al and Chait on al et Baicker. Katherine Baicker PhD (who should know) does not think that Baicker et al (2013) showed that Medicaid doesn’t work.

Indeed she concedes much less than Chait does. He wrote “The study was unable to detect better physical health outcomes.” This is false. The study found better physical health outcomes in the treatment group than in the control group. What Chait should have written was “the study was unable to detect statistically signficicantly better physical health outcomes”.

Treating a statistically insignificant evidence improvement as evidence that there was no improvement is a gross error. It is also almost universal (I have doubts only about the “almost”). In fact Baicker et al found statistically significant effects on access to health care, diagnosis of diabetes, and treatment of diabetes. They did not find new proof that standard treatment of diabetes is better than no treatement. In every other context, this is not treated as an open question. The study did not find statistically signficant evidence that the benefit was smaller than predicted based on other studies either.

But the motto of the New England Journal (and all serious scientific journals) is first make no claims which go beyond the data.

Statistically insignificant is not an assertion. It doesn’t mean zero. It doesn’t mean small. So it is always favored. Then it is read as meaning small or zero.

Chait understands this. He argues that the Baicker et al (2013) study had low power so the fact that “The study was unable to detect better physical health outcomes.” [failed to reject the null of zero effect on physical health] doesn’t tell us much. But even in the context of a discussion of power, he refuses to distinguish zero from statistically insignificantly different from zero. I think there is some rule that people writing for general audiences must not use technical terms like “statistically insignificant”. The result is that they write falsehoods.

Tens of thousands of people a year may die partly because people just will not accept that the Neyman Pierson framework is what it is.

In any case, Roy is reduced to arguing that he understand Baicker et al (2013) and Baicker doesn’t. He is not in great shape totally aside from the question about unreported conflicts of interest.

Comments (3) | |


WASHINGTON (AP) — Congressional Budget Office sees 22 million more uninsured by 2026 under Senate health bill.

Toher Spiro appears to be snipping and tweeting the key bits of the CBO report

Premiums for a 64-year old with middle income go from $6,800 under ACA to $20,500 under BCRA

Deductibles for plans eligible for tax credits go from $3,600 under ACA to $6,000 under BCRA

death spiral

open thread.

Comments (4) | |

Welfare Reform Kills ?

This is an update of this post in which I expressed immense confidence that welfare reform killed people in Florida .

The post is based on

Muennig P1, Rosen Z, Wilde ET. (2013) “Welfare programs that target workforce participation may negatively affect mortality.”


During the 1990s reforms to the US welfare system introduced new time limits on people’s eligibility to receive public assistance. These limits were developed to encourage welfare recipients to seek employment. Little is known about how such social policy programs may have affected participants’ health. We explored whether the Florida Family Transition Program randomized trial, a welfare reform experiment, led to long-term changes in mortality among participants. The Florida program included a 24-36-month time limit for welfare participation, intensive job training, and placement assistance. We linked 3,224 participants from the experiment to 17-18 years of prospective mortality follow-up data and found that participants in the program experienced a 16 percent higher mortality rate than recipients of traditional welfare. If our results are generalizable to national welfare reform efforts, they raise questions about whether the cost savings associated with welfare reform justify the additional loss of life.

It’s not in the abstract, but they also analysed a larger data set and got a larger point estimate of 26% higher deaths due to participation in welfare reform.

The authors have since conceded that they unreasonably underesimated the standard errors of their point estimate. They used cluster robust standard errors with only 2 clusters (2 counties). This is not valid (the estimate of the variance of the point estimate of 16% more deaths is biased down). A reader noticed (as I should have) that the large difference between 16% and 26% would be extremely unlikely if the analysis had been correct.

using a reasonable fixed effects estimator (without the cluster robust consistent but biased down standard errors) they get

In the article we also presented combined results including participants in both Escambia and Alachua Counties, again controlling for year of birth, year of assignment, and site location and clustering the standard errors on location. The point estimate for that analysis is 1.26 (95 percent CI: 1.10, 1.45). Without clustering the standard errors around location, while controlling for location fixed effects as well as the other covariates, the new point estimate is 1.26 (95 percent CI: 0.96, 1.66).

So the more reasonably estimated stardard errors are roughly twice as large as the biased down ones. This means that the null of no effect (ratio of mortality rates =1) isn’t rejected at the 5% level. It is close. But the p-level of a t-statistic of a bit less than 4 is tiny (hugely significant).

The corrected standard errors imply evidence that welfare reform killed people, but not strong evidence. Hence the question mark in the updated title.

Like the authors, I apologize. I should have read the paper more carefully.

I thank Douglas Hess @douglasrhess for pointing out the published correction

Comments (3) | |