Saturday, March 24, 2018

MARS 23 2018

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.

MARS 15 2018

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

MARS 8 2018

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.

MARS 1 2018

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.

 

FEBRUARY 22 2018

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.
Christopher D. Gardner et al., JAMA: Effect of Low-Fat vs Low-Carbohydrate Diet on 12-Month Weight Loss in Overweight Adults and the Association With Genotype Pattern or Insulin Secretion. The DIETFITS Randomized Clinical Trial. What is the effect of a healthy low-fat (HLF) diet vs a healthy low-carbohydrate (HLC) diet on weight change at 12 months and are these effects related to genotype pattern or insulin secretion? In this randomized clinical trial among 609 overweight adults, weight change over 12 months was not significantly different for participants in the HLF diet group (−5.3 kg) vs the HLC diet group (−6.0 kg), and there was no significant diet-genotype interaction or diet-insulin interaction with 12-month weight loss. There was no significant difference in 12-month weight loss between the HLF and HLC diets, and neither genotype pattern nor baseline insulin secretion was associated with the dietary effects on weight loss.

Wednesday, February 21, 2018

FEBRUARY 17 2017

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.

FEBRUARY 8 2017

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.
 
 

JANUARY 31 2017

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?
Jutta Bolt, Robert Inklaar, Herman de Jong, Jan Luiten van Zanden, VOX: Rebasing 'Maddison': The shape of long-run economic development. Research on long-run economic development has relied heavily on the database compiled by Angus Maddison. This column presents a new version of the Maddison Project Database based on historical growth data, but also incorporating historical cross-country income comparisons. The revisions shed new light on patterns of long-term development and cross-country income convergence.
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.

JANUARY 25 2017

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.
Conor Friedersdorf, The Atlantic: Why Can't People Hear What Jordan Peterson Is Saying? A British broadcaster doggedly tried to put words into the academic’s mouth (video). My first introduction to Jordan B. Peterson, a University of Toronto clinical psychologist, came by way of an interview that began trending on social media last week. Peterson was pressed by the British journalist Cathy Newman to explain several of his controversial views. But what struck me, far more than any position he took, was the method his interviewer employed. It was the most prominent, striking example I’ve seen yet of an unfortunate trend in modern communication. (Jordan Peterson home page and the famous biblical lectures)
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