Hutchins Roundup: Prescription drugs, gig economy, and more

Studies in this week’s Hutchins Roundup find that there are differences in drug prescription patterns between physicians who have access to an electronic drug reference database and those who don’t, over a third of non-retired adults engage in informal work, and more.

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Improving physicians’ access to pharmaceutical information lowers the cost of care

A paper by the late Kenneth Arrow of Stanford and Kamran Bilir and Alan Sorensen of the University of Wisconsin-Madison finds that physicians who have access to an electronic drug reference database are more likely to prescribe generics, to prescribe new generics earlier, and to prescribe a more diverse set of drugs compared to physicians who do not subscribe to such a database. In addition, subscribed physicians are less likely to prescribe a new branded drug, possibly a result of their access to drug price and insurance formulary data. They conclude physicians’ access to such information could substantially reduce aggregate drug spending.

A large percentage of non-retired adults participate in the gig economy and some would prefer a formal job

Using original survey data, Anat Bracha and Mary Burke of the Boston Fed find that in 2015, 20 percent of non-retired adults participated in paid informal work that involved significant labor input. By ignoring intermittent, informal work, they say, the Bureau of Labor Statistics underestimates the employment-to-population ratio by 2.5 percentage points and the labor force participation rate by 2 percentage points. They also find that individuals who are classified as working “part-time for economic reasons” by the BLS are most likely to engage in informal work, suggesting that informal work is a form of labor market slack. However, they note that informal work hours often offer higher wages than what the same individuals earn in their formal jobs, suggesting that wages may need to increase substantially in order to attract additional labor into the formal sector.

Quantitative easing in the euro area has contributed to decoupling of bond yields from fundamentals

Ryan van Lamoen and Simona Mattheussens of the Dutch central bank and Martijn Dröes of the University of Amsterdam conclude that the European Central Bank’s quantitative easing programs—especially the purchases of  European government bonds and other public sector assets (Public Sector Purchase Program) begun in March 2015—raised government bond prices and lowered bond yield levels relative to their fundamental values. ”Given the influence of QE on government bond yields and prices,” the authors write, “our findings imply that caution is warranted when this policy is eventually reversed.”

Chart of the week: The gap in consumer confidence among richer and poorer consumers widens

Quote of the week: “Productivity is a gift for rising living standards, perhaps the greatest gift,” says Bank of England Chief Economist Andrew Haldane.

“It is not, however, one that always keeps on giving, as recent events attest. Whether in supporting living standards, or in shrinking their distribution, tackling the global productivity puzzle is among the most pressing public policy issues today. If history is any guide, there is unlikely to be any single measure which puts productivity growth back on track. But measures which support the long tail of companies, currently operating at low levels of productivity, have the potential to do considerable good. As Olympic athletes have shown, marginal improvements accumulated over time can deliver world-beating performance. Applying those marginal gains to the population of UK companies could significantly improve UK living standards, even if those are harder to measure than gold medals.”