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:
Authors: Lant Pritchett, Lawrence H. Summers
What they found: China’s and India’s economic growth is likely to “regress to the mean.” In China, authoritarian political rule and extensive government meddling in business affairs make slower growth even more likely.
Why it matters: Good things must come to an end (or at least slow down). India and, in particular, China have both experienced strong economic growth. Between 2000 and 2010, China’s gross domestic product grew by an average of 9.7 percent; India’s was 6 percent. But regression to the mean (the unsustainability of above- or below-average performance over the long run) is a key takeaway from studies of cross-country growth rates. Extrapolation of current Chinese and Indian growth rates decades into the future is likely to create overoptimistic forecasts; the authors show how this happened in past episodes of “Asiaphoria” — Japan had rapid growth rates from the 1960s through the 1980s, for example, but no longer. Using a more conservative forecast incorporating regression, the authors expect China’s growth rate to slow to 3.9 percent over the next two decades and India’s to drop to 3 percent. Furthermore, the authors utilize a “Polity score,” which quantifies a country’s political institutions (on a spectrum from autocracy to democracy) to show how China’s authoritarian government makes the country more prone to a sharp drops in its growth rate.
Key quote: “India and, even more so, China are experiencing historically unprecedented episodes of growth. China’s super-rapid growth has already lasted three times longer than a typical episode and is the longest ever recorded. The ends of episodes tend to see full regression to the mean, abruptly.”
Data they used: International Monetary Fund World Economic Outlook database; Penn World Table 8.0
Authors: Alan L. Gustman, Thomas L. Steinmeier, Nahid Tabatabai
What they found: Americans nearing retirement haven’t recovered the wealth they lost in the Great Recession. As of 2012, near-retirees’ wealth was 3.6 percent below its 2006 level, even after factoring in inflation and holding constant expected Social Security benefits.
Why it matters: The Great Recession led to an enormous fall in asset prices, denting the savings and investment portfolios of those nearing retirement (defined by the paper’s authors as Americans ages 51 to 56 at the time they were studied). Since then, some but not all of the wealth of these cohorts has been recouped via booming markets. Social Security and defined-benefit pensions were relatively unaffected by market gyrations, and are the bulk of retirement income for many current or soon-to-be retirees. (Social Security benefits, in particular, are the primary source of income for poorer retirees and near-retirees.) The wealthiest near-retirees, those in the top decile of wealth and who had more of their investments in more volatile assets, experienced a 26 percent drop in their wealth between 2006 and 2012. They have yet to completely make up that loss, while those less-wealthy (and more reliant on stable assets such as Social Security benefits) have experienced an increase in wealth.
Key quote: “The bottom line is that the losses in assets imposed by the Great Recession were relatively modest. The recovery has helped. But much of the penalty due to the Great Recession is the result of the failure of assets to grow beyond their initial levels.”
Data they used: Health and Retirement Study, a longitudinal panel study of Americans over age of 50 conducted by the University of Michigan.
Authors: Laurence C. Baker, Kate Bundorf, Daniel Kessler
What they found: State laws that cap how much patients can be charged for access to their electronic medical records (EMRs) lead to more patients switching doctors and more hospitals installing EMR systems.
Why it matters: Federal law regulates that patients are allowed to purchase a copy of their medical records at a “reasonable cost.” But there’s wide variation in what this means, and the cost “ranged from nothing to hundreds of dollars,” according to a separate study mentioned in the paper. The more expensive a medical record, the less likely a patient may be to buy it and take it to a new doctor. To regulate this, states have passed laws that cap how much patients can be charged for EMRs. The authors of this paper find that patients were more likely to change doctors in states with limits on EMR fees. Hospitals in states with such laws were more likely to invest in EMR systems.
Key quote: “On one hand, the underlying medical information is not property, and must be provided to patients on demand under federal law. On the other hand, the party that compiles and holds a medical record owns the embodiment or expression of the information in that particular form. Caps on copy fees effectively sharpen the boundaries of ownership of medical records and strengthen patients’ rights to it. Our findings suggest that similar policies might also create benefits for consumers that exceed their costs.”
Data they used: Truven Analytics MarketScan, totaling about 30 million patient records; Healthcare Information and Management Systems Society data on hospital adoption of EMR systems