NOVEMBER 6 2009

Galati et al, DNB: Did the crisis affect inflation expectations? We investigate whether the anchoring properties of long-run inflation expectations have changed around the economic crisis. By testing for structural breaks we conclude that in the United States, the euro area and the United Kingdom, long-run inflation expectations have become less firmly anchored during the crisis."

Bauer, Herrell, Fed Cleveland: Do Shipping Volumes Signal an End of the Recession? The pattern of manufacturers’ shipments looks similar to the way the 2001 recession ended. The most recent values for freight and passenger transportation services’ 12-month percentage change are still declining, but since June they have moved up from their recent lows. A series that goes back further—and that seems more closely tuned to the overall business cycle—is the Federal Highway Administration’s estimate of vehicle miles of travel. This monthly serie is up.

IMF: The State of Public Finances Cross-Country Fiscal Monitor. Japan, the United Kingdom, Ireland and Spain are projected to require the largest fiscal adjustment. Only Denmark, Korea, Norway, Australia and Sweden among advanced economies will require little or no medium-term adjustment to keep debt stocks at safe levels.

Paul Krugman, Princeton: Increasing returns in a comparative advantage world. Even during comparative-advantage trade eras increasing returns in the form of localized external economies plays a significant role. In fact, the same eras in which comparative advantage seems to have ruled international trade are also the eras in which increasing returns has seemed to exert its strongest influence on intra-national economic geography. And this observation isn’t irrelevant even in the trade context: gains from localization arguably are a significant source of gains from trade, even if they don’t seem to affect the pattern of specialization. Imports of labor-intensive goods from developing countries exert a depressing influence on the real wages of less-skilled workers in advanced countries, but the role of local external economies may offer a partial offset.

Coile, Levine, VoxEU: The current economic crisis will lead to more retirements. Some relatively wealthier workers will be forced to delay retirement, but a larger number of workers with fewer economic resources will be forced into retirement because of their inability to find new jobs. These workers may need to start collecting retirement benefits now to make ends meet, resulting in lower income in retirement and an increased risk of poverty in old age.

Paul Krugman, NYT blog: Growth and jobs. If we take 3rd quarter growth (3,5 %) to be more or less equivalent to average Clinton-era growth, even after 8 years of growth at that rate we’d only expect unemployment to have fallen from the current 9.8% to a still uncomfortably high 6.3%. If we use a Taylor rule that suggests zero rates until the unemployment rate reaches the vicinity of 7%, the Fed should stay on hold for around 6 more years.

Moyen, Stähler, Buba: Unemployment insurance and the business cycle: Prolong benefit entitlements in bad times? Because of consumption smoothing, such a countercyclical policy can be welfare-enhancing as long as it does not affect labor market adjustment too severely or even helps to reduce inefficiencies there. If, however, the labor market is quite inflexible already, procyclical behavior may be preferable. In a calibrated dynamic business cycle framework, we find that countercyclical benefit entitlement duration may be preferable in the US but not in Europe.

Bandiera et al, LSE: The causal effect of interim feedback on individuals’ university performance. Our strategy exploits a natural experiment in a leading UK university where different departments have historically different rules on the provision of feedback to their students. We find the provision of feedback has a positive effect on student’s subsequent test scores throughout the ability distribution, with the effect being more pronounced for more able students. We find no evidence of any individuals being discouraged by feedback.

Caroline M. Hoxby, NBER: The Changing Selectivity of American Colleges: The top ten percent of colleges are substantially more selective now than 5 decades ago, most colleges are not. The explanation is that the elasticity of a student's preference for a college with respect to its proximity to his home has fallen substantially over time and there has been a corresponding increase in the elasticity of his preference for a college with respect to its resources and peers. Even though tuition has been rising rapidly at the most selective schools, the deal students get there has arguably improved greatly. The result is that the "stakes" associated with admission to these colleges are much higher now than in the past.

Levitt, Superfreakonomics: Men respond strongly to cash incentives, women not. In a SAT-style math experiment with 20 questions, in one version every participant was paid 5$ to show up and 15$ for completing the test. In the second version, 5$ to show up and 2$ for each correct answer. Women’s performance did barely react to the cash incentive, average men scored an extra 2 correct answers.

Breit, Hirsch, Trinity U, TX: Why winners of the Economic Prize in the memory of Alfred Nobel took up economics, what drove them. Few wanted to become an economist to begin with (James Tobin, Vernon Smith, William Sharpe, James Heckman). Some took up economics as alternative plans were closed or not worth it (Arthur Lewis, John Harsanyi). Some dont like calling themselves an economist (Granger, Coase). Some pointed to the Role of Great Depression in taking up economics (James Tobin, Paul Samuelson, Robert Solow). Others pointed on the Role of luck (Friedman, Becker).

Zhenxiang, Kaestner, NBER: Effects of Urban Sprawl on Obesity. We exploit the plausibly exogenous variation in population density caused by the expansion of the U.S. Interstate Highway System. We find a negative association between population density and obesity. Estimates indicate that if the average metropolitan area had not experienced the decline in the proportion of population living in dense areas over the last 30 years, the rate of obesity would have been reduced by approximately 13%.

Adams, Telegraph UK: Climate change belief given same legal status as religion. An executive has won the right to sue his employer on the basis that he was unfairly dismissed for his green views after a judge ruled that environmentalism had the same weight in law as religious and philosophical beliefs.

Ronald Noe, PNAS: Economics For Monkeys. The vervet monkey of southern and eastern Africa uses grooming as a kind of currency. They determine the value of food providers and divide their attention according to the law of supply and demand.