Long-run effects of ADHD medication on health and crime

medicineThe number of children diagnosed with attention deficit hyperactivity disorder (ADHD) is on its all-time high. In Germany, for example, the number of diagnosed ADHD cases rose by 42 percent between 2006 and 2011. At age 11, about 7 percent of all boys and 2 percent of all girls were treated with Methylphenidate, the most common drug, mainly known under the brand name Ritalin. Although widely used, very little is known about the long-run effects of these pharmaceuticals.

A new IZA Discussion Paper by Søren Dalsgaard, Helena Skyt Nielsen and Marianne Simonsen contributes to filling this gap. Using Danish data, the economists show that children diagnosed with ADHD who undergo treatment have better long-run health outcomes and show less criminal behavior. More precisely, treated children have fewer hospital contacts due to injuries and fewer emergency room visits, and they are less likely to be charged with a crime as teenagers.

To identify these effects, the researchers use a complex strategy. Since it is not possible to observe the development of the same child with and without treatment, the authors compare outcomes of very similar ADHD children and exploit the fact that some physicians have a much stronger preference for prescribing pharmaceuticals than others. In other words, the researchers try to find statistical twins who go to different doctors and thus are treated differently.

While the findings suggest that treatment of ADHD with Ritalin has benefits in terms of health and criminal behavior, the authors stress that this does not imply all children should be treated. In order to arrive at an overall evaluation of ADHD medication, the estimated gains should be contrasted with (a) the costs of the drugs and (b) possible side effects like insomnia or high blood pressure.

Read abstract or download discussion paper.

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How Viagra changed the lifestyle of elderly men

ViagraThe introduction of Viagra in 1998 changed the world of men suffering from erectile dysfunction. Up until then, there were nearly no remedies available that could have helped men effectively. No wonder that within a few months after its introduction, Viagra dominated the market. Until today, Viagra has been prescribed to approximately 37 million men worldwide.

In a new IZA Discussion Paper, which is forthcoming in Economic Enquiry, Jacob LaRiviere and Hendrik Wolff analyze how the little blue pill influenced lifestyle and behavior of elderly men in the U.S. In a nutshell, the introduction of Viagra seemed to have influenced short-term rather than long-term behavior. On the one hand, Gonorrhea rates for men older than 45 increased by 15-28 percent. Apparently, the drug had an effect on short-term decisions of older men to become more open to risky sexual relationships, increasing the amount of infections with sexual transmittable diseases. On the other hand, the authors find no influence of Viagra on long-term-decisions as divorce and natality rates of the target population are not affected.

Read abstract or download discussion paper.

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Understanding the German minimum wage

eichhorst_harvardWith the introduction of a statutory minimum wage at a rather high starting level of 8.50 euros, Germany has undertaken a large-scale policy experiment that continues to raise eyebrows among economists worldwide. In a statement for Chinese Social Sciences Today, IZA Director of Labor Policy Europe Werner Eichhorst, put this decision into a broader political and economic perspective:

In July 2014, the German Parliament has passed legislation on a new general statutory minimum wage to be introduced by January 2015. The minimum wage of €8.50 gross per hour only allows for very limited exemptions such as for the long-term unemployed when hired initially (up to six months), seasonal workers, young people below the age of 18 as well as for apprentices and student interns (the latter for up to three months).

Furthermore, if collective agreements with wages below the new minimum wage exist currently, they will remain effective during a two-year transition period. A bipartite commission consisting of representatives of employer associations and the trade unions will decide annually on the adjustment of the minimum wage, based on the development of collectively agreed wages observed over a two-year period. This mechanism will be operated for the first time in 2017.

The statutory minimum wage is a remarkable step and a major departure from the current system of industrial relations and labor market governance in Germany. For the first time in post-war Germany, this quasi-universal minimum wage will set a general wage floor for all sectors, occupations and regions. This political decision, supported by the two governing parties, Christian Democrats and Social Democrats, but also by a vast majority of the electorate, can only be understood as a response to the growth of the low-pay sector over the last decade.

With a stricter activation policy addressing the unemployed, a liberalization of non-standard contracts such as temporary agency work and marginal part-time jobs, and a long-term decline of collective bargaining coverage, a larger share of workers were employed at a relatively low wage rate. This low-pay segment was a challenge to the trade unions, but also to the widely shared belief in a ‘fair’ distribution of wages and income. Therefore, the statutory minimum wage will particularly affect those parts of the labor market where low pay is widespread and collectively agreed wage settlements to not really matter.

From an economic point of view, the new minimum wage is likely to put pressure on low-paid jobs, leading most probably to wage and price increases in some cases, but also to job losses in heavily affected occupations and regions. Simulations point at a strong employment impact in small companies, in non-standard jobs, in the eastern part of Germany, and in some low- to medium-skilled occupations of the service sector.

For the sake of evidence-based policymaking, it is necessary to evaluate the effects of the new minimum wage on employment, wages and other outcomes independently and timely before deciding on an adjustment of the statutory minimum wage. Yet, the new legislation does not provide for a systematic consideration of evaluation results.

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Recommended book: How the federal government analyzes and influences the economy

Public EconomicsA newly published three-volume set on “Public Economics in the United States” takes a close look at how the U.S. federal government analyzes and influences the economy. Edited by Steven Payson, 47 chapters written by 61 leading experts deal with economic measurement, fiscal policy, regulatory economics, monetary policy, migration policy, and a variety of other topics such as professional ethics for government economists.

Volume 1 examines government support for businesses, households, infrastructure, and national defense. The second volume addresses the economic analysis of legislation, regulation, and taxation. Volume 3 presents statistical measurement, strategy development, and accountability in government economics. Introductions to the three volumes were written by Murray Weidenbaum, former Chair of the President’s Council of Economic Advisors, Rudolph Penner, former Director of the Congressional Budget Office, and Keith Hall, former Commissioner of the Bureau of Labor Statistics.

IZA Program Director Migration Amelie F. Constant contributed the chapter “An Economic Analysis of Immigration,” which evaluates U.S. migration policy since the beginning on the 20th century. Of all current references available today, this set provides the most authoritative and comprehensive coverage of virtually everything the U.S. government does in the field of economics.

[read more at ABC-CLIO]

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Like father, like son? Family welfare cultures in Norway

wheelchairIn most Western countries children of welfare recipients are more likely to receive welfare benefits themselves. However, it is not clear if this link is causal or driven by other factors. A theory in line with the causal interpretation is that benefit receiving families create an own culture, in which it is “normal” to receive welfare. A different theory suggests that the determinants of poverty and poor health are correlated, but there is no causality.

In a new IZA Discussion Paper, Gordon B. Dahl, Andreas Ravndal Kostøl and Magne Mogstad try to get closer to answering why children of benefit recipients are more likely to be become dependent on social security themselves. The authors investigated spillover effects from parents on children of the Norwegian disability insurance (DI). After a year of sick leave, workers in Norway may apply for DI. While cases with a clear indication of disability are immediately declared eligible, cases in which the disability is ambiguous may be denied and then reconsidered by a randomly assigned judge. As some judges are much more generous than others, some applicants are more likely to receive DI than others.

The researchers exploit this feature of the application process to establish a causal link. When a parent is allowed DI, their adult child’s participation over the next five years increases by 6 percentage points. This effect grows over time, rising to 12 percentage points after ten years. Moreover, these children often report precisely the same medical disorder as their parents did. The researchers interpret their findings as supporting the benefit culture hypothesis: family beliefs and norms are altered due to benefit receipt in a way that destigmatizes being on welfare. This culture seems to be restricted to parent-child relations; close neighbors are not more likely to apply for DI.

Read abstract or download discussion paper.

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Having a successful start-up: How your team should be composed

braceletEntrepreneurship is an important source of innovation and technological change. And as standard macro theory suggests, these are main drivers of growth and prosperity. For a long time entrepreneurs were stereotyped as “lone wolves”, but this is not necessarily true. Start-ups are often led by teams. This raises the question what kind of teams are most successful in setting up a firm.

In a new IZA Discussion Paper Laura Rosendahl Huber, Randolph Sloof and Mirjam Van Praag compare teams of generalists with teams of specialists. They conduct a field experiment with Dutch children playing an entrepreneurship game. The 11- and 12-year-olds are randomly assigned into four groups, based on test results. Math-specialist teams are comprised of pupils with very good math grades but relatively poor verbal skills. Verbal-specialist teams are composed in the same manner. Third, in mixed-specialist teams, representatives from both skill groups work together. And last, there are JATs – the  “Jacks-of-All-Trades” – who have balanced skills, which means they are equally good (or equally bad) at both math and verbal classes.

During a five-day program, the students set up their own small firm to produce friendship bracelets. They start by establishing a business plan and presenting it to a venture capitalist. After designing and producing the friendship bracelets, the children calculate production costs and sales prices, then advertise their product to younger students. After trying to sell as many bracelets as possible, they produce their balance sheet. The group with the best profit/loss relation wins.

The researchers discover that JAT and math-specialist teams performed best. In particular, they did much better than the mixed-specialist teams. This could be taken as evidence that it is not possible to replace the balanced skills of an individual with balanced skills within the group. On average, therefore, teams of generalists tend to perform better than teams of specialists.

A survey among the students after the experiment revealed that in the mixed-specialist groups there was much more internal conflict than among the JATs. So in more diverse groups the costs of coordination and communication seem to be higher than in more homogeneous groups. But this does not necessarily mean that less diversity is performance-enhancing: verbal specialists (perhaps not surprisingly) also reported that there was a lot of arguing going on in their teams.

Read abstract or download discussion paper.

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Kuznets Prize awarded to Paolo Masella at ESPE meeting

Paolo Masella from the University of Sussex received the 2014 Kuznets Prize at the meeting of the European Society for Population Economics (ESPE 2014) in Braga, Portugal. His paper “National Identity and Ethnic Diversity” was selected as the best article published in the Journal of Population Economics in 2013. The prize was presented by the journal’s Editor-in-Chief, IZA Director Klaus F. Zimmermann.

Paolo Masella and Klaus F. Zimmermann

Paolo Masella and Klaus F. Zimmermann

The paper investigates the main determinants of national sentiment and the relationship between ethnic diversity and the intensity of national feelings.

Recent empirical evidence suggests that ethnic diversity has a negative impact on economic development and political stability. In countries with high levels of ethnic diversity “nation building” has often been proposed as a mechanism for integration and conflict reduction.

Contrary to conventional wisdom, Masella finds no evidence of less intense national sentiment in more ethnically fragmented countries or in minority groups. However, he also finds that national feelings in a minority are higher than in the majority depending on the ethnic diversity of a country.

The Journal of Population Economics awards the Kuznets Prize yearly for the best paper published in the journal. The Prize Committee consists of Klaus F. Zimmermann and the journal’s editors, Alessandro Cigno, Erdal Tekin, and Junsen Zhang.

[view pictures of ESPE 2014]

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