Hutchins Roundup: who doctors test for heart attacks, impact of foreign-owned firms in the US, and more

Studies in this week’s Hutchins Roundup find that doctors both over-test and under-test patients for adverse cardiac conditions, foreign-owned multinationals in the U.S. pay better, and more.

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Doctors do too much – and too little – testing of emergency-room cardiac visits

When patients show up in the emergency room with symptoms that suggest they may be having a heart attack, are physicians conducting costly, invasive tests for the right cases? Sendhil Mullainathan of University of Chicago Booth School of Business and Ziad Obermeyer of University of California at Berkeley investigate this question by using machine learning techniques on 20 million Medicare claims.  They find that many patients with the lowest risk are being unnecessarily tested while many patients with the highest risk are under-tested. The untested high-risk group was twice as likely to suffer a heart attack and require additional intervention following an emergency room visit when compared to the sample average; 1.5% of them died within a month. Using a conservative measure of the value of life, the authors find welfare gains from dropping tests for half the low-risk group and increasing tests of the high-risk group by 18%.

Foreign-owned multinationals in the US pay more than US-owned counterparts

Communities often go to great lengths to lure foreign firms. Bradley Setzler and Felix Tintelnot of University of Chicago suggest the effort is generally worthwhile. They find that foreign-owned multinational corporations operating in the US pay 25% higher wages than comparable US-owned firms in the same industry and location, much of that because they tend to hire more high-skilled workers. Adjusting for that, the authors find that the same worker moving from a domestic to a foreign-owned firm earns 7% more. They also find substantial indirect efforts — knowledge spillovers, competitive pressure, and increased efficiency of local suppliers – and find that increases in employment at foreign-owned firms significantly raises value added, employment, and wage bill at domestic firms in the same community. Considering these direct and indirect effects, every additional job created by a foreign-owned company in a community is worth $16,000 per incumbent worker.

Barriers to moving prevents low-income families from moving to better neighborhoods

Recipients of government housing vouchers that allow them to move often don’t choose to move to high opportunity neighborhoods, those where their children are likely to do better. In a randomized control trial in Seattle and King County, Wash., Peter Bergman of Columbia University and coauthors find that when low-income families are provided with assistance to navigate barriers to moving, such as customized housing search, landlord engagement, and short-term financial aid, they tend to move to neighborhoods where upward mobility is greater. The share of families who leased units in high-opportunity neighborhoods increased from 14 percent for the families who did not receive assistance to 54 percent for the families who did. “These findings imply that most low-income families do not have a strong preference to stay in low-opportunity areas; instead, barriers in the housing search process are a central driver of residential segregation by income,” the authors conclude. (For a short video on the paper by Harvard University’s Raj Chetty, click here)

Chart of the week: Women on track to be the majority of the college-educated labor force in 2019

Quote of the week:

“Both [current-account] deficit and surplus countries should tackle the underlying macroeconomic and structural sources of imbalances rather than adopt ineffective, or even counterproductive, measures such as tariffs. Deficit countries, like the U.S. and the U.K. should reduce budget deficits without sacrificing growth and strengthen the competitiveness of their export industries; options include investing more in skills of workers and encouraging old-age saving. Surplus countries, like Germany and Korea, should use fiscal policy where possible to invest more in infrastructure and adopt reforms that encourage private investment…. [In]China… further structural reforms are needed to ensure a lasting external rebalancing, as it gradually addresses vulnerabilities from the high levels of private and public debt.…” writes Gustavo Adler, Luis Cubeddu, and Gita Gopinath, economists at the International Monetary Fund

“[B]oth surplus and deficit countries must recognize that they share the responsibility to secure a stronger and more balanced global economy. That means finding durable solutions to trade disputes to address concerns about export subsidies and weak intellectual property protection, while also modernizing the international trade system in areas such as services and e-commerce. There are serious problems to contend with, such as rising inequality and sluggish growth. Currencies are neither the hammer nor the nail.”