Regression Discontinuity Framework Research Articles

Innovation Under Pressure

Abstract Firms become more efficient at innovation activities when they face pressure to meet earnings per share (EPS) targets using stock repurchases. Using a regression-discontinuity framework, we find that incentives to engage in “EPS-motivated buybacks” are followed by more citations and higher values for firms’ new patents. We trace these effects to improved allocation of R&D resources and a greater focus on novel innovation. The positive effects are concentrated among ex ante “innovation-efficient” firms that achieve better patenting outcomes after reorganizing (but not cutting) their R&D investments. Our findings illustrate that short-term earnings pressure can act through a free cash flow channel that motivates more efficient spending.

Persistent effects of colonial land tenure institutions: Village-level evidence from India

This paper estimates the causal impact of land revenue institutions on long run rural development using a Spatial Regression Discontinuity framework on a new village level data set from colonial India. An early 19th century historical quirk meant that villages in close geographical proximity were assigned to different property rights systems — some falling under landlords and others under the government. Villages that were assigned to landlords in the colonial era have a higher poverty rate and lower consumption per capita in 2012. Village census data from 1961 to 2011 shows that historically rooted characteristics in landlord villages prevented them from accessing Green Revolution technologies. Analysis demonstrates that non-landlord, cultivator villages secured preferential access to public investment in the early decades. Despite some convergence in public goods availability, lower private wealth and investment in landlord villages causes continuing spatial inequalities.

Coming from a Good Pond: The Influence of a New Venture’s Founding Ecosystem on Accelerator Performance

Startup accelerators, which aim to improve the set of choices representing a startup’s entry strategy, have become increasingly influential in both regional development and the strategies of individual startups. This article explores an accelerator’s impact on startup performance and whether that impact varies substantially by features of the startup’s founding environment. Leveraging data from a leading startup accelerator, I use a regression discontinuity framework to hold startup quality constant so that I can compare the performance of admitted startups to those that do not make the cut, and I examine whether any observed performance differentials are driven by accelerator admission and by characteristics of the startup’s earlier environment. I find evidence that startups from better pre-accelerator environments experience stronger gains from accelerator admission. I also find evidence of home bias, as local startups have a stronger treatment effect. These results provide evidence of ecosystem effects whereby the impact of one organizational sponsor in an ecosystem is strongly moderated by other features in the ecosystem. The findings help to explain the concentration of accelerator programs in already successful entrepreneurial ecosystems and reveal how such programs may interact with founding environments to complement resource abundance or magnify prior resource inequalities.

Innovation on Wings: Nonstop Flights and Firm Innovation in the Global Context

We study whether, when, and how better connectivity through nonstop flights leads to positive innovation outcomes for firms in the global context. Using unique data of all flights emanating from 5,015 airports around the globe from 2005 to 2015 and exploiting a regression discontinuity framework, we report that a 10% increase in nonstop flights between two locations leads to a 3.4% increase in citations and a 1.4% increase in the production of collaborative patents between those locations. This effect is driven primarily by firms as opposed to academic institutions. We further study the characteristics of firms and firm locations that are salient to the relation between nonstop flights and innovation outcomes across countries. Using a gravity model, we posit and find that the positive effect of nonstop flights on innovation is stronger for firms and subsidiaries with greater innovation mass (e.g., stocks of inventors and R&D spending), located in innovation hubs or countries that are deemed technology leaders, and that are separated by large cultural or temporal distance. This paper was accepted by Alfonso Gambardella, business strategy. Supplemental Material: The online appendix and data are available at https://doi.org/10.1287/mnsc.2023.4682 .

Negative effects of long parental leave on maternal health: Evidence from a substantial policy change in Austria

I study the effect of parental leave duration on maternal health in the short- to medium-run leveraging variation in parental leave duration induced by an Austrian policy reform in the year 2000. Using rich administrative data and a regression discontinuity framework, I find that long parental leave of 2.5 years instead of 1.5 years deteriorates maternal health. Worse mental health mainly drives this effect. Alternative channels such as differential fertility, long-term employment effects, a change in disposable income or alternative mode of childcare are unlikely to be of main importance. There is substantial heterogeneity with longer leave spells being less harmful for mothers with unhealthy babies proxied by low birth weight.

Estimating the Impact of the Age of Criminal Majority: Decomposing Multiple Treatments in a Regression Discontinuity Framework

Estimating the Impact of the Age of Criminal Majority: Decomposing Multiple Treatments in a Regression Discontinuity Framework

Dating the Lender of Last Resort

Abstract We exploit a fixed rule constraining central bank credit provision in a regression discontinuity framework to analyse counterparties’ behavioural responses to the (non-)receipt of liquidity during a crisis. In spring 1847, the Bank of England suddenly started rationing credit to avoid violating its gold reserve requirement. We show that counterparties that suffered rejection from the Bank were more likely to fail. Conditional on survival, rationed counterparties learned from their experience and changed their behaviour during a subsequent panic in fall 1847: they came to the discount window more often, but submitted smaller requests and relied less on central bank liquidity overall.

Effects of lower screening activity during the COVID-19 pandemic on breast cancer patient pathways: Evidence from the age cut-off of organized screening

We examined the effects of the COVID-19 pandemic on the screening, diagnosis and treatment of breast cancer in Hungary based on administrative data until June 2021, covering three pandemic waves. After correcting for trend and seasonality, the number of mammography examinations decreased by 68% in 2020q2, was around its usual level in 2020q3 and was reduced by 20–35% throughout 2020q4-2021q2. The reduction was caused by a combination of supply-side (temporary suspensions of screening) and demand-side (lower screening participation during the pandemic waves) factors. The number of new breast cancer diagnoses and mastectomy surgeries responded with a lag, and were below their usual level by 15-30% in all quarters between 2020q2 and 2021q2, apart from 2020q4, when there was no significant difference. Using a regression discontinuity framework, we found that the partial mastectomy rate (indicative of early diagnosis) dropped more substantially in 2020q2 in the 61–65 years old age group that was just below the age cut-off of organized screening than in the 66–70 years old age group, and this difference was partially offset in 2021q1. We suggest that policymakers need to motivate the target population (by providing both information and incentives) to catch up on missed screenings.

Heuristic thinking in the workplace: Evidence from primary care.

We study whether primary care physicians (PCPs) exercise left digit bias with respect to patients' age. Relying on a comprehensive administrative visit level data from a large Israeli HMO, we measure the intensity of patients' medical examination in visits that take place around a decadal birthday—a birthday that ends with zero—within a regression discontinuity framework. We find that in standard settings with clear patient information there is no evidence that PCPs exhibit left digit bias. However, when PCPs meet unfamiliar patients seeking immediate care, they are more likely to use basic diagnostic tests just above the decadal birthday threshold, indicating that under these circumstances, PCPs do use left digit bias.

News shocks at the local level: Evidence from a conditional Covid-19 containment measure

To reduce the spread of Covid-19 whilst limiting the economic costs of containment policies, governments have introduced geographically-flexible conditional restrictions — measures targeting sub-national areas whose severity depends on the virus’s local incidence rate. I analyze whether conditional measures impact transmission rates via a news-shock effect — that is, by incentivizing indirect actions in anticipation of the policies being carried out. Exploiting a natural experiment from Romania in a regression-discontinuity framework, I provide early empirical evidence in this sense: I find that the Covid-19 incidence rate fell significantly in targeted constituencies following the announcement of a conditional containment measure, but prior to the policy being implemented. My results add to a broader literature on news-driven fluctuations, wherein expectations of future policies can impact immediate behaviors. I conclude by discussing an important avenue for future research.

New “useless education theory”: Highly educated parents' expectations for their children's education—Evidence from the one-child policy

Using data from the China Family Panel Studies (CFPS) 2010 and a strictly implemented one-child policy as a quasi-experiment, this paper analyses the changes in parents' educational expectations of their children and the underlying mechanisms in a fuzzy regression discontinuity framework. It was found that one-child policy compliers have lower educational expectations for their children after acquiring an advanced education than those who did not. The finding remains valid after robustness analysis and placebo tests. Combined with an examination of the intergenerational effects of birth, this finding may be related to parents' assessment of and responses to educational returns and equality of educational opportunities. It was also found that parents with lower educational attainment in the high-income group have higher educational expectations than those with higher educational attainment, while for those with lower income, there is no significant difference between higher educational attainment and otherwise, which indirectly verifies the causal inference of this paper. The finding of this study explains the new “useless education theory” and provides a new perspective for understanding the intergenerational transmission of education.

School Spending and Student Outcomes: Evidence from Revenue Limit Elections in Wisconsin

This study examines the impacts of two distinct types of school spending on student outcomes. State-imposed revenue limits cap the total amount of revenue that a school district in Wisconsin can raise unless the district holds a referendum asking voters to exceed the cap. Importantly, Wisconsin law requires districts to hold separate referenda for operational and capital expenditures, which allows for estimating their independent effects. Leveraging close elections in a dynamic regression discontinuity framework, I find that increases in operational spending have substantial positive effects on test scores, dropout rates, and postsecondary enrollment, but additional capital expenditures have little impact. (JEL D72, H75, I21, I22, I28)

Decentralizing investment: Evidence from municipal organization after close elections

AbstractI use close municipal elections in a nonparametric regression discontinuity framework to study the organizational dimension of local public investment following a decentralization reform in Peru. National political organizations' mayors winning by very narrow margins approve and execute larger investments than those of other types of parties; they also choose structures, systems, and personnel more conducive to active investment, engage in beneficial contracting relationships with outside funding sources, and achieve more stable financial and social performance. Evidence on the consequential influence of national parties only after the decentralization reform, with their aggregate investment implications, is discussed.

The Dynamic Electoral Returns of a Large Antipoverty Program

Abstract Governments around the world use short-term reelection strategies. This is problematic if governments can maximize their reelection chances by prioritizing short-term spending before an election over long-term reforms. This paper tests whether longer program exposure has a causal effect on election outcomes in the context of a large antipoverty program in India. Using a regression-discontinuity framework, the results show that length of program exposure lowers electoral support for the government. The paper discusses a couple of potential explanations, finding that the most plausible mechanism is that voters hold the government accountable for the program's implementation quality.

The intergenerational impact of reduced generosity in the social safety net

This paper provides new causal evidence on how a reduction in welfare cash assistance to newly separated parents impacts the parents themselves and their young-adult children. Our paper differs from the rest of the literature evaluating the intergenerational impacts of welfare policy because it focuses on the role of welfare assistance specifically at the point of parental relationship separation. A priori, it is unclear if a policy that provides welfare assistance to newly separated mothers produces work-disincentive effects and/or whether, on balance, it helps or hinders recovery from the event of separation. We use a reform that withdrew welfare eligibility from mothers who separated from their partners on or after 1 July 2006, while mothers who separated before this date were exempt from the new rules. We exploit this discontinuity in a Regression Discontinuity framework using biweekly administrative social security records. We find that the loss of welfare eligibility at the time of relationship breakdown reduces mothers’ welfare benefits, but increases their personal and family income. The reform is found to decrease young adults’ reliance on unemployment benefits, but this result is weaker and less robust. The effects on young adults’ receipt of other types of welfare payments, fertility, homelessness or financial independence cannot be identified precisely.

Impact of the Change in Payments on the Actual and Perceived Behaviors of Medical Care Providers

Prior literature established the link between a person aging out of a parent's insurance coverage at age nineteen and a significant decrease in insurance coverage of those nineteen-year-old young adults. This paper furthers this line of research by establishing a statically significant change in the payment burden of the various sources that comprise the total payment received by the medical care providers treating young adults who have aged out of their parent's insurance. The empirical method used is the regression discontinuity framework. The impact of the change in the providers' payment sources on the providers' behavior (supply-side) and the patients' perception of the providers' behavior (demand-side) is examined using a 14-year sample of unmarried young adults from the Medical Expenditure Panel Survey. This research finds that although there is a statistically significant change in the sources of the total payments received by medical care providers, they do not change their actual treatment decisions. However, the patients do perceive a statistically significant adverse change in the behavior of their medical care providers.

Quantifying the effect of Wakefield et al. (1998) on skepticism about MMR vaccine safety in the U.S.

Efforts to trace the rise of childhood vaccine safety concerns in the US often suggest Andrew Wakefield and colleagues' retracted 1998 Lancet study (AW98)-which alleged that the MMR vaccine can cause children to develop autism-as a primary cause of US vaccine skepticism. However, a lack of public opinion data on MMR safety collected before/after AW98's publication obscures whether anecdotal accounts are indicative of a potentially-causal effect. We address this problem using a regression discontinuity framework to study change in monthly MMR injury claims (N = 74,850; from 1990-2019) from the Vaccine Adverse Events Reporting System (VAERS) to proxy concern about vaccine safety. Additionally, we suggest a potential mechanism for the effect of AW98 on vaccine skepticism, via automated sentiment analyses of MMR-related news stories (N = 674; from 1996-2000) in major television and newspaper outlets. AW98 led to an immediate increase of about 70 MMR injury claims cases per month, averaging across six estimation strategies (meta-analytic effect = 70.44 [52.19, 88.75], p < 0.01). Preliminary evidence suggests that the volume of negative media attention to MMR increased in the weeks following AW98's publication, across four estimation strategies (meta-analytic effect = 9.59% [3.66, 15.51], p < 0.01). Vaccine skepticism increased following the publication of AW98, which was potentially made possible by increased negative media coverage of MMR. Childhood vaccine skepticism presents an important challenge to widespread vaccine uptake, and undermines support for pro-vaccine health policies. In addition to advancing our understanding of the previously-obscured origins of US vaccine skepticism, our work cautions that high-profile media attention to inaccurate scientific studies can undermine public confidence in vaccines. We conclude by offering several recommendations that researchers and health communicators might consider to detect and address future threats to vaccine confidence.

Difference in Hospital Utilization Within the First 12Months Among Low-Birth-Weight Infants in Medicaid Managed Care Versus Fee-for-Service: A Regression Discontinuity Study.

To examine the effect of Medicaid managed care (MMC) versus Medicaid fee-for-service (FFS) on emergency department (ED) use and hospitalization during the first 6 and 12months of life among low-birth-weight (LBW) infants. We used the New York City Office of Vital Statistics-Statewide Planning and Research Cooperative System (OVS-SPARCS) dataset to identify 9135 LBW infants born to female Medicaid beneficiaries in New York City from January 2008-March 2012. We applied a robust regression discontinuity framework using a New York State Medicaid policy in effect at that time. This policy automatically enrolled infants born to female Medicaid beneficiaries to Medicaid managed care (MMC) or Medicaid fee-for-service (FFS) based on their birth weight (less than 1200g vs. 1200-2500g) during the first 6months of their lives. LBW infants in MMC had an average 0.16% points higher probability of being hospitalized within the first year of their lives than those in Medicaid FFS (p-value = 0.04). More research is necessary to understand possible differences in healthcare utilization between MMC and FFS participants with high health risks.

By the Letter of Law? The Effects of Administrative Adjudication for Resolving Disputes in NYC’s Restaurant Grading Initiative

Administrative adjudication can serve as a quasi-judicial forum for resolving disputes resulting from government regulations. New York City recently required restaurants to post letter grades reflecting their compliance with food safety regulations and incorporated an easily accessible administrative adjudication system into its policy design. This study examines the implementation of this feature of the policy by using a regression discontinuity framework to explore the effects of the grading policy on adjudication processes and regulatory outcomes. Quantitative data included 222,527 food safety inspection records (2007–2014); qualitative data included interviews, observations, and document review. Restaurants were more likely to have violations reduced and grades improved at adjudication when grades were at stake. Moreover, adjudication outcomes were highly sensitive to score differences near grade cut-points. Professional representatives helped restaurants to negotiate the interpretation of rules in the quasi-judicial proceedings, softening rigidity of regulations. Representatives’ expertise was consistent with being “repeat players,” which may distort the use of such forums to ensure justice and fairness. This study illuminates the ramifications of including alternative dispute resolution systems in the implementation of regulatory policies.

Testing monotonicity of conditional treatment effects under regression discontinuity designs

SummaryResearchers are often interested in the relationship between treatment effects and observed individual heterogeneity. This paper proposes the first nonparametric monotonicity test for conditional treatment effects under the popular regression discontinuity framework. The proposed test examines whether the average treatment effect or the local average treatment effect has a monotonic relationship with some of the observed individual characteristics. We show consistency and asymptotic uniform size control of the proposed test, and apply the test to study treatment effect heterogeneity in two empirical settings.