The Harvard – Mexico Connection

 

Harvard has educated some interesting Mexican Presidents:

 

Miguel de la Madrid: MPA Harvard University.

 

Carlos Salinas: PhD, Harvard University.

 

Felipe Calderon: MPA, Harvard University.

 

Now Felipe is back at Harvard as a “lecturer and researcher” thanks to “Gianna Angelopoulos, who in 2012 created the Angelopoulos Global Public Leaders Fellowship program,  “to retain and re-train leaders who have distinguished themselves in service to the public and are now transitioning to another career.”

 

Not only that, but the Kennedy School has admitted Calderon’s former spokesperson into their MPA program even though she does not have an undergraduate degree!    They also admitted the spokesperson’s husband, but he does at least have a BA.

 

No word yet about the status of Felipe’s household pets……….

 

English: Cropped picture of Carlos Salinas de ...

English: Cropped picture of Carlos Salinas de Gortari, president of Mexico (1988-1994). Español: Fotografía recortada de Carlos Salinas de Gortari, presidente de México (1988-1994). (Photo credit: Wikipedia)

Felipe Calderon

Felipe Calderon (Photo credit: Wikipedia)

 

 

 

 

English: President of Mexico Mr. Miguel de la ...

English: President of Mexico Mr. Miguel de la Madrid arriving at Andrews Air Base,Maryland (Photo credit: Wikipedia)

Never assume your assumptions don’t matter

I’ve been to a lot of DSGE seminars. At Duke, at the Fed, heck we even have ’em in Oklahoma! One thing most have in common is that they use the Calvo rule to implement price stickiness.

The Calvo rule is a shortcut which assumes that a firm has a fixed probability of getting a chance to change its price in any given period. This probability is independent of how far their price is away from the optimum or how long it’s been since they changed prices.

Time after time I’d object, and time after time I’d be told that the Calvo rule was a benign modeling “trick” that made things less intractable with no real influence on the results.

This morning, I was pleased to discover the research of a young Chicago (Booth) researcher named Joseph Vavra. He’s doing a lot of very interesting work, but what really caught my attention was his piece, The Empirical Price Duration Distribution and Monetary Non-Neutrality.

Here’s the abstract:

Allowing for price adjustment probabilities that vary with the number of periods since an item last adjusted (duration-dependenceí) provides a significantly better fit of observed price spells in CPI and grocery store micro data than the Calvo model, even if the latter is extended to incorporate item-specific adjustment probabilities. Furthermore, extending the Calvo model to match both duration-dependence and cross-item heterogeneity, as observed in the micro data, leads to an increase of 100-230% in monetary non-neutrality, even with no strategic-complementarities. As much as half of this increase is driven by duration-dependent adjustment probabilities.

Nicely played, sir, kudos. Not so innocuous after all, that Calvo rule.

Given how our profession often works, I fear he may have trouble getting this published. But, since he has R and Rs at the QJE and Econometrica, I think he’ll be OK no matter what happens to this piece.

The seen and the unseen

What accounts for a firm’s success or failure in exporting?

A new NBER working paper by Molina & Muendler investigates this question in a sample of Brazilian firms.

Here’s the abstract:

Exporters differ considerably in terms of export-market participation over time and employment size. But this marked diversity among exporters is not reflected in their workforce composition regarding commonly observed worker skills or occupations. Using Brazilian linked employer-employee data, we turn to a typically unknown worker characteristic: a worker’s prior experience at other exporters. We show that expected export status, predicted with current destination-country trade instruments, leads firms to prepare their workforce by hiring workers from other exporters. Hiring away exporter workers is associated with both a wider subsequent reach of destinations and a deeper market penetration at the poaching firm, but only with reduced market penetration at the firm losing the worker. This evidence is consistent with the hypothesis that expected export-market access exerts a labor demand shock, for which exporters actively prepare with selective hiring, and with the idea that a few key workers affect a firm’s competitive advantage.

In other words, workers in successful and unsuccessful export firms look alike on their observable characteristics, but there is a pool of exceptional workers, and the firms know who they are!

Great stuff!

If the link to the article provided above is gated or expired, an older version of the paper is available via Google Scholar.