David Bholat,
James Brookes, BoE: Laying bare linguistic patterns in PRA messages using
machine learning. In a recent
research paper, we show that the way supervisors write to banks and building
societies (hereafter ‘banks’) has changed since the financial crisis.
Supervisors now adopt a more directive, forward-looking, complex and formal
style than they did before the financial crisis. We also show that their language and linguistic style is
related to the nature of the bank. For instance, banks that are closest to
failure get letters that have a lot of risk-related language in them. In this
blog, we discuss the linguistic features that most sharply distinguish
different types of letters, and the machine learning algorithm we used to
arrive at our conclusions.
Neil Irwin, NYT:
Globalization’s Backlash Is Here, at Just the Wrong Time. The M.I.T. economist David Autor and colleagues have
done extensive work showing that the “China shock” that ensued with that
country’s entry into the World Trade Organization caused lasting pain to
communities in the United States that competed with Chinese companies in making
a range of manufactured goods. Even as those effects linger, he sees the risks
involved in commerce with China as shifting elsewhere. “The China shock on large-scale manufacturing and
its mass employment effects, that part is largely behind us,” Mr. Autor said.
Now, the challenge is Chinese competition on more technologically complex
products, like automobiles, airplanes or microprocessors. The
manufacturing of more labor-intensive, less technologically complex products
like apparel is migrating to lower-wage countries like Bangladesh and Ethiopia.
Daron Acemoglu,
Pascual Restrepo, NBER: Demographics and Automation. We argue theoretically and document empirically that
aging leads to greater (industrial) automation, and in particular, to more
intensive use and development of robots. Using US data, we document that robots
substitute for middle-aged workers (those between the ages of 36 and 55). We then show that demographic
change—corresponding to an increasing ratio of older to middle-aged workers—is
associated with greater adoption of robots and other automation technologies
across countries and with more robotics-related activities across US commuting
zones. We also provide evidence of more rapid development of automation
technologies in countries undergoing greater demographic change. Our
directed technological change model further predicts that the induced adoption
of automation technology should be more pronounced in industries that rely more
on middle-aged workers and those that present greater opportunities for
automation. Both of these predictions receive support from country-industry
variation in the adoption of robots. Our model also implies that the
productivity implications of aging are ambiguous when technology responds to
demographic change, but we should expect productivity to increase and labor
share to decline relatively in industries that are most amenable to automation,
and this is indeed the pattern we find in the data.
Lukas Kießling,
Jonas Radbruch, Sebastian Schaube, IZA: The Impact of Self-Selection on
Performance. In many natural environments, carefully chosen peers influence
individual behavior. In this paper, we examine how self-selected peers affect
performance in contrast to randomly assigned ones. We conduct a field
experiment in physical education classes at secondary schools. Students
participate in a running task twice: first, the students run alone, then with a
peer. Before the second run,we elicit preferences for peers. We experimentally
vary the matching in the second run and form pairs either randomly or based on
elicited preferences. Self-selected peers improve individual performance by
.14-.15 SD relative to randomly assigned peers. While self-selection leads to more social ties and lower
performance differences within pairs, this altered peer composition does not
explain performance improvements. Rather, we provide evidence that
self-selection has a direct effect on performance and provide several markers
that the social interaction has changed.
Marco Francesconi,
Matthias Parey, IZA: Early Gender Gaps among University Graduates. We use data from six cohorts of university graduates
in Germany to assess the extent of gender gaps in college and labor market
performance twelve to eighteen months after graduation. Men and women enter
college in roughly equal numbers, but more women than men complete their
degrees. Women enter college with slightly better high school grades, but women
leave university with slightly lower marks. Immediately following university completion, male and
female full-timers work very similar number of hours per week, but men earn
more than women across the pay distribution, with an unadjusted gender gap in
full-time monthly earnings of about 20 log points on average. Including a large
set of controls reduces the gap to 5-10 log points. The single most important
proximate factor that explains the gap is field of study at University.
Orsetta
Causa, Mikkel Hermansen, VOX: Income redistribution through taxes and transfers
across OECD countries. Growing wealth inequality
has become a key concern for economists, and tackling it requires a deep
understanding of how tax and transfer systems affect the income distribution. Using OECD data, this column
argues that taxes and transfers are less effective at reducing inequality today
than they were in the mid-1990s. This drop in effectiveness has largely been
driven by declining cash transfers, with a smaller, more heterogeneous
role for personal income taxes.
Jessica Irvine,
The Sydney Morning Herald: The evidence is in: first-born siblings are better. That’s right. New findings from large scale
population surveys reveal that not only are first-born children more
intelligent, they have better personalities, are more likely to be employed,
earn higher incomes and have better mental health. But it’s not all roses. The stress of being so
awesome also means first-borns have higher blood pressure and are more likely
to be overweight. A small price to pay, perhaps, for their innate
superiority.
Alex Hoagland,
Trevor Woolley, Brigham Young University: It's No Accident: Evaluating the
Effectiveness of Vehicle Safety Inspections. Traffic
fatalities have fallen steadily over the past two decades, particularly those
due to car failure. Many have attributed this fall to safer vehicle technology.
This trend has led many states to reevaluate mandatory vehicle safety
inspection programs. In 2009 and 2010, New Jersey and Washington, D.C. ended
their programs, opening a perfect window for analysis. We use New Jersey, a
repeal state, to test whether repeal leads to more accidents. Using a synthetic
control methodology and precise data on fatal accident rates from throughout
the United States, we
conclude that removing the requirements resulted in no significant increases in
any of traffic fatalities per capita, traffic fatalities due specifically to
car failure per capita, or the frequency of accidents due to car failure.
Therefore, we conclude that vehicle safety inspections do not represent an
efficient use of government funds, and do not appear to have any significantly
mitigating effect on the role of car failure in traffic accidents.
Aakash Mankodi, Tim Pike, BoE: Can central bankers
become Superforecasters? Tetlock and
Gardner’s acclaimed work on Superforecasting provides a compelling case for
seeing forecasting as a skill that can be improved, and one that is related to
the behavioural traits of the forecaster. These so-called Superforecasters have in recent years
been pitted against experts ranging from U.S intelligence analysts to
participants in the World Economic Forum, and have performed on par or better
by accurately predicting the outcomes of a broad range of questions.
Sounds like music to a central banker’s ears? In this post, we examine the
traits of these individuals, compare them with economic forecasting and draw
some related lessons. We conclude that considering the principles and applications
of Superforecasting can enhance the work of central bank forecasting.
Benjamin Austin, Edward Glaeser, Lawrence Summers,
Brookings Papers on Economic Activity:Saving the heartland: Place-based
policies in 21st Century America. America’s regional disparities are large and regional
convergence has declined if not disappeared. This wildly uneven economic
landscape calls for a new look at spatially targeted policies. There are three
plausible justifications for place-based policies–agglomeration economies,
spatial equity and larger marginal returns to targeting social distress in high
distress areas. The second justification is stronger than the first and the
third justification is stronger than the second. The enormous social costs of non-employment suggest that
fighting long-term joblessness is more important than fighting income
inequality. Stronger tools, such as spatially targeted employment credits, may
be needed in West Virginia than in San Francisco.
Philippe Aghion, Benedicte Berner, Project Syndicate:
Macron’s Education Revolution. Up to now, students have been placed in universities
through a lottery system, which often fails to match students with the right
school or discipline. But after Macron’s reforms are implemented, students’
school performance and preferred subjects will become the determining factors
in university placement. The final exam, the baccalauréat, will focus on two
major subjects, two minor subjects, and an oral exam, instead of covering 10-15
disparate topics. To
reduce the failure rate at the bachelor-degree level, the reforms will also
introduce university pre-requisites, rather than guaranteeing eligibility for
all. All of this will align France more closely with countries such as Sweden
and Germany, where unemployment is far lower.
Joseph J. Sabia, Taylor Mackay, Thanh Tam Nguyen,
Dhaval M. Dave, NBER: Do Ban the Box Laws Increase Crime? Ban-the-box (BTB)
laws, which prevent employers from asking prospective employees about their
criminal histories at initial job screenings, have been adopted by 25 states
and the District of Columbia. Using data from the National Incident-Based
Reporting System, the Uniform Crime Reports, and the National Longitudinal
Survey of Youth 1997, this study is the first to estimate the effect of BTB
laws on crime. We find
some evidence that BTB laws are associated with an increase in property crime
among working-age Hispanic men. This finding is consistent with employer-based
statistical discrimination as well as potential moral hazard. A causal
interpretation of our results is supported by placebo tests on policy leads and
a lack of BTB-induced increases in crime for non-Hispanic whites and women.
Finally, we find that BTB laws are associated with a reduction in property
crime among older and white individuals, consistent with labor-labor
substitution toward those with perceived lower probabilities of having criminal
records (Doleac and Hansen 2017).
Henry Sauermann, Chiara Franzoni, Kourosh Shafi, NBER:
Crowdfunding Scientific Research. Crowdfunding may provide much-needed financial
resources, yet there is little systematic evidence on the potential of
crowdfunding for scientific research. We first briefly review prior research on
crowdfunding and give an overview of dedicated platforms for crowdfunding
research. We then analyze data from over 700 campaigns on the largest dedicated
platform, Experiment.com. Junior
investigators are more likely to succeed than senior scientists, and women have
higher success rates than men. Conventional signals of quality - including scientists'
prior publications - have no relationship with funding success, suggesting that
the crowd applies different decision criteria than traditional funding
agencies. Our results highlight significant opportunities for crowdfunding in
the context of science while also pointing towards unique challenges. We
relate our findings to research on the economics of science and on
crowdfunding, and we discuss connections with other emerging mechanisms to
involve the public in scientific research.
Amnon Cavari, Guy Freedman, The Journal of Politics:
Polarized Mass or Polarized Few? Assessing the Parallel Rise of Survey
Nonresponse and Measures of Polarization. In this study, we
argue that the perceived polarization of Americans along party lines is
partially an artifact of the low response rates that characterize contemporary
surveys. People who agree to participate in opinion surveys are more informed,
involved, and opinionated about the political process and therefore hold
stronger, more meaningful, and partisan political attitudes. This motivational
discrepancy generates a bias in survey research that may amplify evidence of
party polarization in the mass public. We test the association between response
rates and measures of polarization using individual-level data from Pew surveys
from 2004 to 2014 and American National Election Studies from 1984 to 2012. Our empirical evidence
demonstrates a significant decline in unit response that is associated with an
increase in the percentage of politically active, partisan, and polarized
individuals in these surveys. This produces evidence of dissensus that, on some
issues, may be stronger than exists in reality.
Nima Sanandaji, CATO: The Nordic Glass Ceiling. Welfare policies,
high taxes that make it costly to purchase substitutable services, generous
benefit systems that reduce economic incentives for full-time work,
public-sector monopolies/oligopolies in female-dominated sectors, and
paid-leave policies that incentivize long breaks from working life prevent
women from reaching the top. Taken together, these policies create a Nordic
glass ceiling. Gender quotas are unable to make up the difference, even though
politicians routinely point to gender quotas as a policy success story. In
reality they fall short of their objectives. It is true that Nordic countries have high female
employment rates and an unusually gender-equal history and gender-equal values,
and these achievements merit admiration. Still, the proportion of women
managers, executives, and business owners is disappointingly low.
Ali Alizadeh, The Conversation: Friday essay: Joan of
Arc, our one true superhero. In my view, Jeanne d’Arc, despite living a good 350
years before the advent of the modern revolution, is an exemplary
materialisation of the figure of the revolutionary. Long before Robespierre,
Marx, Lenin, Luxemburg and Guevara, Jeanne the Maid of Orléans committed
herself to the cause of transforming the world from the bottom up. She fought for justice in the
direction of a universal collectivity – a very early, very nascent notion of a
unified nation under the rule of one sovereign – and not in the interest of a
particular identitarian or sectarian grouping. In the medieval, pre-modern
heroine, we find a pre-emptive inversion of the mantras of the “progressive”,
reformist, non-revolutionary bourgeois activists of postmodernity. For
Jeanne the Maid, the public was the personal, and not merely the other way
around. She made the world be the change that she wanted to see in herself. She
thought local and acted global
Kenneth Rogoff,
Project Syndicate: Economists vs. Scientists on Long-Term Growth. Artificial intelligence researchers and conventional
economists may have very different views about the impact of new technologies.
Most economic forecasters have largely shrugged off recent advances in artificial
intelligence (for example, the quantum leap demonstrated by DeepMind’s
self-learning chess program last December), seeing little impact on longer-term
trend growth. Such pessimism is surely one of the reasons why real
(inflation-adjusted) interest rates remain extremely low, even if the
bellwether US ten-year bond rate has ticked up half a percentage point in the
last few months. If
supply-side pessimism is appropriate, the recent massive tax and spending
packages in the United States will likely do much more to raise inflation than
to boost investment. But right now, and forgetting the possibility of an
existential battle between man and machine, it seems quite plausible to expect
a significant pickup in productivity growth over the next five years.
Anna Orlovskaya,
Conor Sewell, BoE: Peer to Peer – Scale and Scalability. Peer to Peer (P2P) lending is a hot topic at Fintech
events and has received a lot of attention from academia, journalists, various
international bodies and regulators.
Following the Financial Crisis, P2P platforms saw an opportunity to fill
a gap in the market by offering finance to customers and businesses struggling
to get loans from banks. Whilst some argue they will one
day revolutionise the whole banking landscape, many platforms have not yet
turned a profit. So before asking if
they are the future, we should first ask if they have a future at all.
Problems such as a higher cost of funds, or limited ability to scale the
business, may mean the only viable path is to become more like traditional
banks.
Sendhil
Mullainathan, NYT: The Hidden Taxes on Women. The working world is unfair to many women, yet even when they succeed,
they must confront another series of challenges. Their hard-won successes are
taxed in ways that men’s are not. The taxes I’m talking about aren’t paid in
dollars and cents or imposed by the government. They take the form of annoyance
and misery and are levied by individuals, very often by loved ones. Winning an election increases
subsequent divorce rates for female candidates but not for men (This paper,
like most of the social science literature, focuses on female-male partners.)
These divorces are not the exclusive result of hard-fought campaigns.
The study examined elections with very narrow margins of victories, in which
winning was largely a matter of luck. These “lucky” winners also experienced
higher divorce rates. Corporate success has similar consequences: Women who
become chief executives divorce at higher rates than others.
Angus Deaton,
NBER: What do Self-Reports of Wellbeing Say about Life-Cycle Theory and Policy? I respond to Atkinson's plea to revive welfare
economics, and to considering alternative ethical frameworks when making policy
recommendations. I examine a measure of self-reported evaluative wellbeing, the
Cantril Ladder, and use data from Gallup to examine wellbeing over the
life-cycle. I assess the
validity of the measure, and show that it is hard to reconcile with familiar
theories of intertemporal choice. I find a worldwide optimism about the future;
in spite of repeated evidence to the contrary, people consistently but
irrationally predict they will be better off five years from now. The
gap between future and current wellbeing diminishes with age, and in rich
countries, is negative among the elderly. I also use the measure to think about
income transfers by age and sex. Policies that give priority those with low
incomes favor the young and the old, while utilitarian policies favor the
middle aged, and men over women.
Erika Check
Hayden, Nature: Colossal family tree reveals environment’s influence on
lifespan. Computational biologist Yaniv
Erlich of Columbia University in New York City and his colleagues have used
crowdsourced data to make a family tree that links 13 million people. The ancestry
chart, described today in Science, is believed to be the largest verified
resource of its kind — spanning an average of 11 generations. Erlich’s team analysed the birth and death
dates of the people in this tree, and calculated whether individuals were more
likely to have died at similar ages if they were closely related. The group
concludes that heredity explains only about 16% of the difference in lifespans
for these individuals. Most of the differences were down to other factors, such
as where and how people lived.
Tim Harford, The
Undercover Economist: Like great coffee, good ideas take time to percolate. Monmouth Coffee opened on Monmouth Street in London
in 1978. It serves wonderful coffee and the queues often stretch out of the
door. That is what makes what happened next so surprising. What happened next
was: nothing. Data show that just because good ideas emerge does not mean that
they spread quickly. Researchers at the OECD have concluded that within most sectors (for
example, coal mining or food retail) there is a large and rising gap in productivity
between the typical business and the 100 leading companies in the sector. The
leading businesses are nearly 15 times more productive per worker, and almost
five times more productive even after adjusting for their use of capital such
as buildings, computers and machinery.
Jared A.
Forrester, Thomas G. Weiser, Wilderness & Environmental Medicine: An Update
on Fatalities Due to Venomous and Nonvenomous Animals in the United States
(2008–2015). The Centers for Disease
Control and Prevention Wide-Ranging Online Data for Epidemiologic Research
database was queried to return all animal-related fatalities between 2008 and
2015. There were 1610 animal-related fatalities, with the majority from
nonvenomous animals (2.8 deaths per 10 million persons). The largest proportion
of animal-related fatalities was due to “other mammals,” largely composed of
horses and cattle. Deaths attributable to Hymenoptera (hornets, wasps, and bees)
account for 29.7% of the overall animal-related fatalities and have been steady
over the last 20 years. Dog-related
fatality frequencies are stable, although the fatality frequency of 4.6 deaths
per 10 million persons among children 4 years of age or younger was nearly
4-fold greater than in the other age groups. Appropriate education and
prevention measures aimed at decreasing injury from animals should be directed
at the high-risk groups of agricultural workers and young children with dogs.
Neil
Irwin, NYT: How Low Can Unemployment Really Go? Economists Have No Idea. There exists, in theory at least, some magic number
for the unemployment rate that keeps those priorities in perfect balance, a
bare minimum level of joblessness that makes room for people to move around yet
ensures that nearly everyone who wants to can find work without inflation
bubbling up. Economists, as they are prone to do, have created an acronym for
it: Nairu, or the non-accelerating inflation rate of unemployment. The problem is, it is looking
more and more as if we have no idea what this magic number is — an uncertainty that has huge economic
consequences. Does the 4.1 percent jobless rate in January represent something
lower than this “natural rate” of unemployment and presage damaging inflation,
as mainstream estimates have long suggested? Or could it fall more —
maybe a lot more — putting more people to work without negative side effects?
Kasey Buckles,
Daniel Hungerman, Steven Lugauer, NBER: Is Fertility a Leading Economic
Indicator? Many papers show that
aggregate fertility is pro-cyclical over the business cycle. In this paper we
do something else: using data on more than 100 million births and focusing on
within-year changes in fertility, we show that for recent recessions in the
United States, the growth
rate for conceptions begins to fall several quarters prior to economic decline.
Our findings suggest that fertility behavior is more forward-looking and
sensitive to changes in short-run expectations about the economy than
previously thought.
Hamish Low, Costas
Meghir, Luigi Pistaferri, Alessandra Voena, NBER: Marriage, Labor Supply and
the Dynamics of the Social Safety Net. The 1996 PRWORA reform introduced time limits on the
receipt of welfare in the United States. We use variation by state and across
demographic groups to provide reduced form evidence showing that such limits
led to a fall in welfare claims (partly due to “banking” benefits for future
use), a rise in employment, and a decline in divorce rates. We then specify and
estimate a life-cycle model of marriage, labor supply and divorce under limited
commitment to better understand the mechanisms behind these behavioral
responses, carry out counterfactual analysis with longer run impacts and
evaluate the welfare effects of the program. Based on the model, which
reproduces the reduced form estimates, we show that among low educated women, instead of relying
on TANF, single mothers work more, more mothers remain married, some move to
relying only on food stamps and, in ex-ante welfare terms, women are worse off.
Nadia Garbellini,
Institute for New Economic Thinking: What Piketty
Missed in Measuring Wealth. Despite assembling a formidable
data set and leveling a bold argument, Thomas Piketty’s Capital in the
Twenty-First Century has theoretical and accounting flaws that distort its
central findings. First, excluding Corporations from the computation of
national wealth strongly distorts results. Second, physical and financial
capital should be kept separate, also in order to interpret results
consistently with a reference theoretical paradigm. Third, Neoclassical theory
normally considers accumulation as generated by income, and hence the concept
to be used is that of disposable income, and not of GNI. Finally, in line with
Classical/Keynesian tradition, an analysis of capital accumulation should
reverse Neoclassical logic: it is accumulation that generates income, and not
the other way around. Hence, the concept to be used is that of GDP, as compared
to the stock of physical capital which generated it.
Daniel Little,
Understanding society: Computational social science. Is it possible to elucidate
complex social outcomes using computational tools? Can we overcome some of the
issues for social explanation posed by the fact of heterogeneous actors and
changing social environments by making use of increasingly powerful computational
tools for modeling the social world? Ken
Kollman, John Miller, and Scott Page make the affirmative case to this question
in their 2003 volume, Computational Models in Political Economy. The book
focuses on computational approaches to political economy and social choice.
Their introduction provides an excellent overview of the methodological and
philosophical issues that arise in computational social science.
Scott Sinnett, Cj
Maglinti, Alan Kingstone,
PLOS: Grunting's competitive advantage: Considerations of force and distraction. Grunting is pervasive in many athletic contests, and
empirical evidence suggests that it may result in one exerting more physical
force. It may also distract one's opponent. That grunts can distract was
supported by a study showing that it led to an opponent being slower and more
error prone when viewing tennis shots. The present
findings indicate that simulated grunting may distract an opponent, leading to
slower and more error prone responses. The implications for martial arts in
particular, and the broader question of whether grunting should be perceived as
'cheating' in sports, are examined.
J. Robert Subrick,
James Madison University: The Political Economy of Black Panther's Wakanda. This chapter explores the political economy of
Wakanda and its leader, Black Panther. After explaining the origins of Black
Panther, the chapter turns to the economic puzzle of Wakanda by exploring the
geographic and economic implications of isolation. This is followed by an
investigation into the way Wakanda has avoided the resource curse that has
plagued so many other countries. Next, a comparison is made between Wakanda and
the nation of Botswana. While there are some telling similarities, the lack of
democracy in Wakanda is a glaring difference. It will discuss how it has developed high-levels of
technology that help advance the Black Panther’s dictatorship. Finally, it will
address the potential for democracy to emerge in Wakanda. Black Panther offers
an opportunity to understand the role of political institutions in affecting
the long-run economic, political, and technological development of a country.
Matthieu Bussiere,
Menzie D. Chinn, Laurent Ferrara, Jonas Heipertz, NBER: The New Fama Puzzle. We re-examine the
Fama (1984) puzzle – the finding that ex post depreciation and interest
differentials are negatively correlated, contrary to what theory suggests – for
eight advanced country exchange rates against the US dollar, over the period up
to February 2016. The rejection of the joint hypothesis of uncovered interest
parity (UIP) and rational expectations – sometimes called the unbiasedness
hypothesis – still occurs, but with much less frequency. Strikingly, in contrast
to earlier findings, the Fama regression coefficient is positive and large in
the period after the global financial crisis. However, using survey based
measures of exchange rate expectations, we find much greater evidence in favor
of UIP. Hence, the main
story for the switch in Fama coefficients in the wake of the global financial
crisis is mostly a change in how expectations errors and interest differentials
co-move, though the risk premium also plays a critical role for safe haven
currencies (Japanese yen and Swiss franc).
David A. Jaeger,
Joakim Ruist, Jan Stuhler, IZA: Shift-Share Instruments and the Impact of
Immigration. A large literature exploits
geographic variation in the concentration of immigrants to identify their
impact on a variety of outcomes. To address the endogeneity of immigrants'
location choices, the most commonly-used instrument interacts national inflows by
country of origin with immigrants' past geographic distribution. We present evidence that
estimates based on this "shift-share" instrument conflate the short-
and long-run responses to immigration shocks. If the spatial distribution of
immigrant inflows is stable over time, the instrument is likely to be
correlated with ongoing responses to previous supply shocks. Estimates based on
the conventional shift-share instrument are therefore unlikely to identify the
short-run causal effect. We propose a "multiple
instrumentation" procedure that isolates the spatial variation arising
from changes in the country-of-origin composition at the national level and
permits us to estimate separately the short- and long-run effects. Our results
are a cautionary tale for a large body of empirical work, not just on
immigration, that rely on shift-share instruments for causal inference.
Seetha Menon,
Andrea Salvatori, Wouter Zwysen, IZA: The Effect of Computer Use on Job Quality:
Evidence from Europe. This paper
studies changes in computer use and job quality in the EU-15 between 1995 and
2015. We document that while the proportion of workers using computers has
increased from 40% to more than 60% over twenty years, there remain significant
differences between countries even within the same occupations. Several
countries have seen a significant increase in computer use even in low-skilled
occupations generally assumed to be less affected by technology. Overall, the great increase in
computer use between 1995 and 2015 has coincided with a period of modest
deterioration of job quality in the EU-15 as whole, as discretion declined for
most occupational and educational groups while intensity increased slightly for
most of them. Our OLS results that exploit variation within
country-occupation cells point to a sizeable positive effect of computer use on
discretion, but to small or no effect on intensity at work. Our instrumental
variable estimates point to an even more benign effect of computer use on job
quality. Hence, the results suggest that the (moderate) deterioration in the
quality of work observed in the EU-15 between 1995 and 2015 has occurred
despite the spread of computers, rather than because of them.
Ofer Malamud,
Andreea Mitrut, Cristian Pop-Eleches, NBER: The Effect of Education on
Mortality and Health: Evidence from a Schooling Expansion in Romania. This paper examines a schooling expansion in Romania
which increased educational attainment for successive cohorts born between 1945
and 1950. We use a regression discontinuity design at the day level based on
school entry cutoff dates to estimate impacts on mortality with 1994-2016 Vital
Statistics data and self-reported health with 2011 Census data. We find that the schooling
reform led to significant increases in years of schooling and changes in labor
market outcomes but did not affect mortality or self-reported health.
These estimates provide new evidence for the causal relationship between
education and mortality outside of high-income countries and at lower margins
of educational attainment.
Michael Sinkinson,
Amanda Starc, Econofact: Could Drug Ads Have Positive Side Effects? The United States is one of only two countries in the
world where it is legal for pharmaceutical companies to advertise their
products directly to consumers. Drug ads are expensive and pharmaceutical
companies are spending hefty sums advertising certain drugs. Evidence indicates
that such advertising does indeed lead to increases in drug sales, some of
which happen at the expense of a competitor's product. But, by expanding the
patient population, advertising can also lead to social benefits. A consumer that starts taking
statins is much less likely to have a heart attack. And heart attacks are
expensive to treat. We find that the benefits of getting these patients on
statins far outweigh the costs of the statin ads themselves and were larger
even than the costs of all direct-to-consumer drug advertising added together
in the year of our study.
David Slusky,
Richard J. Zeckhauser. NBER: Sunlight and Protection Against Influenza. Recent medical literature suggests that vitamin D
supplementation protects against acute respiratory tract infection. Humans
exposed to sunlight produce vitamin D directly. This paper investigates how
differences in sunlight, as measured over several years within states and
during the same calendar month, affect influenza incidence. We find that sunlight strongly
protects against influenza. This relationship is driven by sunlight in late
summer and early fall, when there are sufficient quantities of both sunlight
and influenza activity. A 10% increase in relative sunlight decreases
the influenza index in September by 3 points on a 10-point scale. This effect
is far greater than the effect of vitamin D supplementation in randomized
trials, a differential due to broad exposure to sunlight, hence herd immunity.
We also find suggestive evidence, consistent with herd immunity theory, that
the protective sunlight effect is strongest with a middle level of population
density.
John Fernald,
Robert E. Hall, James H. Stock, Mark W. Watson, San Francisco FED: The
Disappointing Recovery in U.S. Output after 2009. U.S. output has expanded only slowly since the
recession trough in 2009, counter to normal expectations of a rapid cyclical
recovery. Removing cyclical
effects reveals that the deep recession was superimposed on a sharply slowing
trend in underlying growth. The slowing trend reflects two factors: slow growth
of innovation and declining labor force participation. Both of these
powerful adverse forces were in place before the recession and, thus, were not
the result of the financial crisis or policy changes since 2009.
Gregory Mankiw,
NYT: Why Economists Are Worried About International Trade. After analyzing the data, Mr. Frankel and Mr. Romer
concluded that “a rise of one percentage point in the ratio of trade to G.D.P.
increases income per person by at least one-half percent.” In other words,
nations should take the theories of Smith, Ricardo and Melitz seriously. To be sure, expanding trade
hurts some people in the short run, especially those in import-competing
sectors who have to find new jobs. That fact may call for a robust safety net
and effective retraining. But it does not undermine the conclusion that free
trade raises average living standards. That is the theory and evidence
regarding international trade. I don’t expect this academic work to persuade
Mr. Trump. But he is said to pay more attention to briefings that
contain his own name. So let’s return to Adam Smith’s birthplace and ponder
these questions: Should we impose a tariff on Americans vacationing at
Scotland’s Trump International Golf Links? Or should vacationers make their consumption
choices free from the heavy hand of government?
Menzie Chinn,
Economfact: Threats to U.S. Agriculture from U.S. Trade Policies. The Trump Administration initiated a process of
renegotiating the North American Free Trade Agreement (NAFTA) with Canada and
Mexico, which includes the option of exiting the deal altogether. In addition,
the United States has started a series of investigations of unfair practices leveled
against China, some of which have already resulted in the imposition of new
tariffs. These trade
policy initiatives threaten agricultural exports both because of the potential
increase of tariffs on exports to Canada and Mexico that would result from a
withdrawal from NAFTA as well as the very real threat of retaliation in
response to other proposed policies.
Susanne Frick,
Andrés Rodríguez-PoseVOX: Urban concentration and economic growth. Urban concentration is typically deemed to lead to
greater national economic growth. This column challenges this view, using an
original dataset covering 68 countries over the past three decades. Urban
concentration levels have decreased or remained stable on average, though these
averages hide widely diverging trends across countries. Although concentration has been beneficial for
high-income countries, this hasn’t been the case for for developing countries.
Tim Harford, The
Undercover Economist: What We Get Wrong About Technology. Blade Runner (1982) is a magnificent film, but
there’s something odd about it. The heroine, Rachael, seems to be a beautiful
young woman. In reality, she’s a piece of technology — an organic robot
designed by the Tyrell Corporation. Los Angeles police detective Rick Deckard
knows; in Rachael, Deckard
is faced with an artificial intelligence so beguiling, he finds himself falling
in love. Yet when he wants to invite Rachael out for a drink, what does he do?
He calls her up from a payphone. There is something revealing about the
contrast between the two technologies — the biotech miracle that is Rachael,
and the graffiti-scrawled videophone that Deckard uses to talk to her. It’s not
simply that Blade Runner fumbled its futurism by failing to anticipate the
smartphone. That’s a forgivable slip, and Blade Runner is hardly the only film
to make it.
Adam Davidson, The
New Yorker: Money, Power, and Deer Urine. How regulators start to serve special
interests. Deer farming doesn’t require
as much acreage as cows or crops, and there’s little need for technology. All
you have to do is throw up some fences, get pregnant does, and buy feed (the
deer like beans and corn). There are roughly ten thousand deer farms in North
America, and some thirty per cent are owned by the Amish. The deer are usually
raised for venison or hunting, but Lapp found another specialty: he is one of
America’s premier producers of deer urine. Lapp, along with the deer-farming
industry as a whole, is facing a crisis in the form of chronic wasting disease,
a plague that attacks white-tailed deer, elk, moose, reindeer, and other
members of the cervid family. The risk-mitigation plan, like all regulation,
isn’t based purely on science; it also takes into account politics and
economics. The plan’s
disparate treatment of urine and meat is an example of what economists call
regulatory capture: the process by which regulators, who are supposed to pursue
solely the public interest, instead become solicitous of the very industries
they regulate.
Noëmie Lisack, Rana Sajedi and Gregory Thwaites, BoE:
Population ageing and the macroeconomy. An unprecedented ageing process is unfolding in
industrialised economies. The share of the population over 65 has gone from 8%
in 1950 to almost 20% in 2015, and is projected to keep rising. What are the
macroeconomic implications of this change? What should we expect in the coming
years? In a recent staff working paper, we link population ageing to several key economic trends
over the last half century: the decline in real interest rates, the rise in
house prices and household debt, and the pattern of foreign asset holdings
among advanced economies. The effects of demographic change are not expected to
reverse so long as longevity, and in particular the average time spent in
retirement, remains high.
Elva Bova, Tidiane Kinda, Jaejoon Woo, VOX: Austerity
and inequality: The size and composition of fiscal adjustment matter. Understanding the
distributional consequences of fiscal adjustment measures is important for
equity, but also to ensure the sustainability of the measures. This column
shows that fiscal
adjustments increase inequality, including through unemployment. Spending-based
adjustments worsen inequality more significantly than tax-based adjustments.
Progressive taxation and targeted social benefits and subsidies introduced in
the context of a broader decline in spending can help offset some of the
distributional impact of fiscal adjustments.
Camille Landais, Arash Nekoei, J Peter Nilsson, David
Seim, Johannes Spinnewijn, VOX: Unemployment insurance and adverse selection:
Evidence from Sweden. Unemployment
insurance is compulsory in almost all countries, with no choice for workers
over the level of coverage. But why restrict choice if it can improve the
targeting of individuals who value the insurance the most? This column uses
evidence from Sweden to examine whether the issue of adverse selection
justifies a universal mandate for unemployment insurance. Workers who purchased more
generous unemployment insurance were more than twice as likely to be unemployed
in the following year. A universal mandate combats such adverse selection, but
forces workers to buy insurance even when insurance costs are higher than the
value they assign to it.
Kenneth Rogoff, Project Syndicate: When Will Tech
Disrupt Higher Education? Universities pride
themselves on producing creative ideas that disrupt the rest of society, yet
higher-education teaching techniques continue to evolve at a glacial pace. Given education’s centrality to
raising productivity, shouldn’t efforts to reinvigorate today’s sclerotic
Western economies focus on how to reinvent higher education? Universities
and colleges are pivotal to the future of our societies. But, given impressive
and ongoing advances in technology and artificial intelligence, it is hard to
see how they can continue playing this role without reinventing themselves over
the next two decades.
Cody Cook, Rebecca Diamond, Jonathan Hall, John A.
List, Paul Oyer, Stanford: The Gender Earnings Gap in the Gig Economy: Evidence
from over a Million Rideshare Drivers. The growth of
the "gig" economy generates worker flexibility that, some have
speculated, will favor women. We explore one facet of the gig economy by
examining labor supply choices and earnings among more than a million rideshare
drivers on Uber in the U.S. Perhaps most surprisingly, we find that there is a
roughly 7% gender earnings gap amongst drivers. The uniqueness of our
data—knowing exactly the production and compensation functions—permits us to
completely unpack the underlying determinants of the gender earnings gap. We
find that the entire gender gap is caused by three factors: experience on the
platform (learning-by-doing), preferences over where/when to work, and
preferences for driving speed. Overall, our results suggest that, even in the gender-blind,
transactional, flexible environment of the gig economy, gender-based
preferences (especially the value of time not spent at paid work and, for drivers, preferences for driving
speed) can open gender earnings gaps. The preference differences that
contribute to pay differences in professional markets for lawyers and MBA’s
also lead to earnings gaps for drivers
on Uber, suggesting they are pervasive across the skill distribution and whether in the traditional or gig
workplace.
Yann Bramoulléa, Lorenzo Ductor, Journal of Economic
Behavior & Organization: Title length. We document strong and robust
negative correlations between the length of the title of an economics article
and different measures of scientific quality. Analyzing all articles
published between 1970 and 2011 and referenced in EconLit, we find that
articles with shorter titles tend to be published in better journals, to be
more cited and to be more innovative. These correlations hold controlling for
unobserved time-invariant and observed time-varying characteristics of teams of
authors.
Manon K. Schweinfurth, Michael Tabo, Current Biology: Reciprocal
Trading of Different Commodities in Norway Rats. The prevalence of reciprocal cooperation in non-human
animals is hotly debated. Part of this dispute rests on the assumption that
reciprocity means paying like with like. However, exchanges between social
partners may involve different commodities and services. Hitherto, there is no
experimental evidence that animals other than primates exchange different
commodities among conspecifics based on the decision rules of direct
reciprocity. Here, we show
that Norway rats (Rattus norvegicus) apply direct reciprocity rules when
exchanging two different social services: food provisioning and allogrooming.
Focal rats were made to experience partners either cooperating or
non-cooperating in one of the two commodities. Afterward, they had the
opportunity to reciprocate favors by the alternative service. Test rats traded
allogrooming against food provisioning, and vice versa, thereby acting by the
rules of direct reciprocity. This might indicate that reciprocal altruism among
non-human animals is much more widespread than currently assumed.
Alberto F.
Alesina, Carlo Favero, Francesco Giavazzi. NBER: What do we know about the
effects of Austerity? This paper
summarizes the results of a large recent literature on multi year fiscal plans
for deficit reduction (austerity). The key results are that deficit reduction policies based upon spending
cuts are much less costly in terms of short run output losses than tax based
adjustments. On average fiscal adjustment based upon spending cuts have very
small output costs and in some cases they are expansionary. We then
discuss which possible models can explain these findings and discuss how the
evidence can disentangle them.
Gene Amromin ,
Mariacristina De Nardi , Karl Schulze, Chicago FED: Inequality and Recessions. The increase in inequality over the past several
decades has received widespread attention from both academics and the public at
large. While much of this discourse centers on either the causes or normative
implications of increasing inequality, it is important to ask whether the
widening gap between the rich and poor has any direct effects on macroeconomic
aggregates and, in particular, on the severity of the Great Recession, when
output and consumption dropped precipitously and were slow to recover. Is it possible that the changing
distribution of wealth intensified and lengthened the effects of this downturn?
More broadly, should economists and policymakers concerned with macroeconomics
be worried about wealth inequality?
Edward N. Wolff,
NBER: Household Wealth Trends in the United States, 1962 to 2016: Has Middle
Class Wealth Recovered? Asset prices
plunged between 2007 and 2010 but then rebounded from 2010 to 2016. The most
telling finding is that median wealth plummeted by 44 percent over years 2007
to 2010. The inequality of net worth, after almost two decades of little
movement, went up sharply from 2007 to 2010, and relative indebtedness for the
middle class expanded. The
sharp fall in median net worth and the rise in overall wealth inequality over
these years are largely traceable to the high leverage of middle class families
and the high share of homes in their portfolio. Mean and median wealth
rebounded from 2010 to 2016, by 17 and 28 percent, respectively. While
mean wealth surpassed its previous peak in 2007, median wealth was still down
by 34 percent. More than 100 percent of the recovery in both was due to a high
return on wealth but this factor was offset by negative savings. Relative
indebtedness continued to fall for the middle class from 2010 to 2016, and
wealth inequality increased somewhat. The racial and ethnic disparity in wealth
holdings widened considerably between 2007 and 2016, and the wealth of
households under age 45 declined in relative terms.
Going blind to see
more clearly: unconscious bias in Australian, Behavioural Economics Team of The
Australian Government: We found that the public
servants engaged in positive (not negative) discrimination towards female and
minority candidates: Participants were 2.9% more likely to shortlist female
candidates and 3.2% less likely to shortlist male applicants when they were
identifiable, compared with when they were de-identified. Minority males
were 5.8% more likely to be shortlisted and minority females were 8.6% more likely to be shortlisted when identifiable compared to when
applications were de-identified. The positive discrimination was strongest for
Indigenous female candidates who were 22.2% more likely to be shortlisted when
identifiable compared to when the applications were de-identified. Interestingly,
male reviewers displayed
markedly more positive discrimination in favour of minority candidates than did
female counterparts, and reviewers aged 40+ displayed much stronger
affirmative action in favour for both women and minorities than did younger
ones.
Eduardo Porter,
NYT: Is the Populist Revolt Over? Not if Robots Have Their Way. As the world’s oligarchy gathered last week in
Davos, Switzerland, to worry about the troubles of the middle class, the real
question on every plutocrat’s mind was whether the populist upheaval that
delivered the presidency to the intemperate mogul might mercifully be over. If
it was globalization — or, more precisely, the shock of imports from China —
that moved voters to put Mr. Trump in the White House, could politicians get
back to supporting the market-oriented order once the China shock played out? Economists studying the changes
in the nature of work that produced such an angry political response suggest,
however, that another wave of disruption is about to wash across the world
economy, knocking out entire new classes of jobs: artificial intelligence. This
could provide decades’ worth of fuel to the revolt against the global elites
and their notions of market democracy.
Karen Weintraub,
NYT: Elephants Are Very Scared of Bees. That Could Save Their Lives. Elephants are afraid of bees. Let that
sink in for a second. The largest animal on land is so terrified of a tiny
insect that it will flap its ears, stir up dust and make noises when it hears
the buzz of a beehive. In recent years, researchers and advocates have
persuaded farmers to use
the elephant’s fear of bees as a potential fence line to protect crops. By
stringing beehives every 20 meters — alternating with fake hives — a team of
researchers in Africa has shown that they can keep 80 percent of elephants away
from farmland.
Catherine Chapman,
Dailymail: The self-parking slippers by Nissan: 'Smart' Japanese hotel offers guests footwear that moves back into
position when not being worn using car sensor technology. Nissan has created smart
slippers to drive onto the feet of hotel guests in Japan. The product is using
the automaker's ProPilot Park technology to move around. The
self-parking slippers are meant to raise awareness of autonomous vehicles.
Douglas Clement,
Minneapolis FED: Equity and Efficiency in Space. If the rich are richer partly because they live in more productive
locations, does a progressive federal income tax result in a poorer economy? In
this study the economists focus on the variation in productivity from one
location to another across the United States. Productivity is higher in Boston,
for example, than Akron. Wages reflect that difference. “Our results suggest that a
progressive income tax code can reduce between-group welfare inequality without
decreasing total worker welfare.” How do progressive taxes both reduce
inequality and improve worker well-being? “By shifting the distribution of
workers toward cities with more elastic housing supply.” Workers migrate
toward cheaper housing; benefits that landowners would reap from a flat tax
flow toward workers instead.
David Deming,
Econofact: Automation and the Growing Importance of Social Skills in the Labor
Market. What is relatively new is
that, since 2000, there appears to be a slowdown in higher-paying, skilled jobs
and that technological change could be playing a role in this shift. After two
decades of expansion, growth in the share of workers employed in high-skill
"cognitive" occupations (those classified as managerial,
professional, and technical categories by the U.S. Census) slowed down. Changing trend is driven by a
decline in the share of jobs in science, technology, engineering and
mathematics — the so-called STEM fields — which shrank by a total of 0.12
percentage points as a share of the U.S. labor force be. Jobs requiring social
skills have experienced strong relative employment and wage growth.
Christopher
Pissarides, Jacques Bughin, Project Syndivate: Embracing the New Age of Automation. With rapid advances in automation and artificial
intelligence in recent years, many are worried about a jobless future and
sky-high levels of inequality. But the large-scale technologically driven shift
currently underway should be welcomed, and its adverse effects should be
managed with proactive policies to reinvest in workers. It is imperative that we reinvest AI-driven
productivity gains in as many economic sectors as possible. Such reinvestment
is the primary reason why technological change has benefited employment in the
past. But without a strong local AI ecosystem, today’s productivity gains may
not be reinvested in a way that fuels spending and boosts demand for labor.
Policymakers urgently need to ensure that strong incentives for reinvestment
are in Place.
Pierre-André
Chiappori, Bernard Salanié, Yoram Weiss, AER: Partner Choice, Investment in
Children, and the Marital College Premium. We construct a model of household decision-making in
which agents consume a private and a public good, interpreted as children's
welfare. Children's utility depends on their human capital, which depends on
the time their parents spend with them and on the parents' human capital. We
first show that as returns to human capital increase, couples at the top of the
income distribution should spend more time with their children. This in turn
should reinforce assortative matching, in a sense that we precisely define. We
then embed the model into a transferable utility matching framework with random
preferences, a la Choo and Siow (2006), which we estimate using US marriage
data for individuals born between 1943 and 1972. We find that the preference for partners of the same
education has significantly increased for white individuals, particularly for
the highly educated. We find no evidence of such an increase for black
individuals. Moreover, in line with theoretical predictions, we find that the
"marital college-plus premium" has increased for women but not for
men.
Henrik Kleven,
Camille Landais, Jakob Egholt Søgaard, NBER:
Children and Gender Inequality: Evidence from Denmark. Despite considerable gender convergence over time,
substantial gender inequality persists in all countries. Using Danish
administrative data from 1980-2013 and an event study approach, we show that
most of the remaining gender inequality in earnings is due to children. The
arrival of children creates a gender gap in earnings of around 20% in the long
run, driven in roughly equal proportions by labor force participation, hours of
work, and wage rates. Underlying these “child penalties”, we find clear dynamic
impacts on occupation, promotion to manager, sector, and the family
friendliness of the firm for women relative to men. Based on a dynamic
decomposition framework, we
show that the fraction of gender inequality caused by child penalties has
increased dramatically over time, from about 40% in 1980 to about 80% in 2013.
As a possible explanation for the persistence of child penalties, we show that
they are transmitted through generations, from parents to daughters (but not
sons), consistent with an influence of childhood environment in the formation
of women’s preferences over family and career.
Harold James,
Project Syndicate: The Stupid Economy. Worse still, ample evidence shows that people may
have reason to regret retiring from mentally demanding jobs and embarking on a
life of leisure. It turns out that not having to think on a regular basis is
neither restful nor enjoyable. On the contrary, it tends to lead to poor mental
and physical health, and a deteriorating quality of life. The elimination of
countless cognitive tasks has alarming implications for the future. Just as the Industrial
Revolution made most humans physically weaker, the AI revolution will make us
collectively duller. In addition to flabby waistlines, we will have flabby
minds. It’s not the economy, stupid; it’s the stupid economy. Already,
central banks are urgently exploring new ways to dumb down their statements for
an increasingly unsophisticated public. Mass stupidity will be driven by
technology
