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In The Papers: The 9/11 Dust Cloud, Stock Prices And Lead Exposure

Every Monday, the National Bureau of Economic Research, a nonprofit organization made up of some of North America’s most respected economists, releases its latest batch of working papers. The papers aren’t peer-reviewed, so their conclusions are preliminary (and occasionally flat-out wrong). But they offer an early peek into some of the research that will shape economic thinking in the years ahead. Here are a few of this week’s most interesting papers.


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Title: The 9/11 Dust Cloud and Pregnancy Outcomes: A Reconsideration

Authors: Janet Currie and Hannes Schwandt

What they found: The dust cloud following the Sept. 11, 2001, terrorist attacks in New York City created an environmental hazard for in-utero fetuses, leading to lower birth weights, greater incidence of premature births and more admissions to the neonatal intensive care unit (NICU) — especially for boys.

Why it matters: The 9/11 attacks were an unprecedented environmental catastrophe for a major U.S. city. The carcinogenic pollutants released in their aftermath should have, according to previous research, negatively affected birth outcomes for in-utero fetuses, yet research to date had not found any evidence of this for the babies born to women living near the affected areas. But these women were not like average moms — they were already predisposed to positive birth outcomes. This paper controls for the socioeconomic status of the mothers and their families in and around the neighborhoods affected by the 9/11 dust cloud. The authors followed them over time and found statistically robust evidence of negative birth outcomes. That the negative effects were especially pronounced for boys is in accordance with literature on “fragile males” that documents how male fetuses are more vulnerable to bad outcomes.

Key quote: “[W]omen who lived in neighborhoods exposed to the 9/11 dust cloud were quite different than women in other parts of New York City. In particular, they were less likely to have poor birth outcomes, other things being equal. When we control for these pre-existing differences by following the same mothers over time, we find large effects of exposure to the dust cloud.”

Data they used: New York City birth records from 1994 to 2004, totaling more than 1.2 million births.


Title: Changing Times, Changing Values: A Historical Analysis of Sectors within the U.S. Stock Market 1872-2013

Authors: Oliver D. Bunn and Robert J. Shiller

What they found: Using more than 130 years of data, the cyclically adjusted price-to-earnings (CAPE) ratio can be used to predict stock price movements by sector. This method is enhanced by accounting for changes in corporate payout policy and by factoring in inflationary effects.

Why it matters: Shiller, a 2013 Nobel laureate in economics, teamed with Bunn to spruce up his favorite stock-market indicator, the CAPE ratio. The price-to-earnings (PE) ratio helps gauge how “expensive” a share of a company’s stock is compared to its underlying fundamentals — its earnings. Shiller pioneered adjusting PE ratios to the current state of the economy, the so-called business cycle. In this paper, Shiller and Bunn tweak the CAPE ratio to forecast stock-price movements using decades of originally sourced data on three sectors: railroads, utilities and industrials.

Key quote: “Our results using over a hundred years of data are consistent with the notion that major sectors of the stock market show frequent mispricings that can be exploited in an investment strategy that generally leads to better results than holding the market portfolio.”

Data they used: Primary sources beginning in the 1870s through today, most notably Standard & Poor’s Security Price Index Record and the Standard & Poor’s Analysts’ Handbook


Title: Lead Exposure and Behavior: Effects on Antisocial and Risky Behavior among Children and Adolescents

Author: Jessica Wolpaw Reyes

What they found: Higher exposure to lead in childhood is linked to major behavioral problems in later childhood and young adulthood, such as attention-deficit and hyperactivity disorder (ADHD) and teen pregnancy, as well as aggressive and criminal behavior.

Why it matters: Lead is a toxic metal, and children especially are harmed by exposure to it, even at very low levels. Lead can inhibit important neurological and behavioral development, leading to lower IQ, in addition to aggressive and impulsive behavior.

Lead-based paint and water pipes are common means of childhood exposure, but leaded gasoline was also common before 1985 and existing research has already validated a tight link between lead in gasoline and the level of lead in children’s blood. In this paper, Reyes examines the relationship between the phase-out of lead in gasoline following the Clean Air Act and negative behavioral outcomes like ADHD, teen pregnancy and criminal activity in young adults. Because the link between lead exposure and behavior could be confounded by socioeconomic factors, the author controlled for individual and family characteristics. Even after making these adjustments, Reyes found significant negative behavioral outcomes were caused by lead exposure.

Key quote: “The foregoing results suggest that lead — and other environmental toxicants that impair behavior — may be missing links in social scientists’ explanations of social behavior. Social problems may be, to some degree, rooted in environmental problems. As a consequence, environmental or public health policy aimed at reducing exposure to environmental toxicants may be effective in reducing the social and economic costs associated with child behavior problems, teen pregnancy, aggression, and crime.”

Data they used: Children’s blood lead levels from the second National Health and Nutrition Examination Survey; behavioral outcomes from the National Longitudinal Survey of Youth, covering a nationally representative sample of 10,000 individuals born circa 1980; and data on the lead content in gasoline from a “variety of government sources.”

Andrew Flowers writes about economics and sports for FiveThirtyEight.

Filed under In the Papers 47 posts, Terrorism 41, New York City 34, Quick Hits 24, Stock Market 24, Pregnancy 16, Lead Poisoning 5, ADHD 4, CAPE Ratio 1, Robert Shiller 1

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