Pelin Berkmen et al, IMF: The Global Financial Crisis: Explaining Cross-Country Differences in the Output Impact. Countries with more leveraged domestic financial systems and more rapid credit growth tended to suffer larger downward revisions to their growth outlooks. For emerging markets, this financial channel trumps the trade channel. For a broader set of developing countries, however, the trade channel seems to have mattered, with countries exporting more advanced manufacturing goods more affected than those exporting food. Exchange-rate flexibility clearly helped in buffering the impact of the shock. There is also some —weaker—evidence that countries with a stronger fiscal position prior to the crisis were hit less severely. We find little evidence for the importance of other policy variables.
Felix Hüfner and Isabell Koske, OECD: Explaining household saving rates in G7 countries: implications for Germany. We analyse the determinants of household saving rates in the G7 countries since the 1970s in a panel co-integration framework. Unlike many previous studies, our specification allows for heterogeneity in the long- and short-run parameters across countries and explicitly distinguishes between financial liberalisation effects and wealth effects. Apart from finding that income developments as well as real interest rates and inflation are influencing household savings in most countries, results suggest that wealth effects through house and stock prices play a role in many countries, notably over the more recent period. According to the model, the recent increase in the German saving rate is due to two factors: Firstly, the actual saving rate was below its estimated equilibrium level at the end of the 1990s, implying an upward correction over the medium term. Secondly, the equilibrium saving rate has moved upwards in the first half of the 2000s, largely because of declines in stock prices.
Mary Daly And Bart Hobijn, San Fransisco Fed: Okun’s Law and the Unemployment Surprise. In 2009, strong growth in productivity allowed firms to lay off large numbers of workers while holding output relatively steady. This behavior threw a wrench into the long-standing relationship between changes in GDP and changes in the unemployment rate, known as Okun’s law. If Okun’s law had held in 2009, the unemployment rate would have risen by about half as much as it did over the course of the year.
Paul Beaudry, David A. Green, Benjamin M. Sand, NBER: How Much Is Employment Increased by Cutting Labor Costs? Estimating the Elasticity of Job Creation. The main finding of the paper is that U.S. labor market outcomes observed at the city-industry level appear to conform well to the restrictions implied by search and bargaining theory and, using 10-year differences, we estimate the elasticity of the job creation curve with respect to wages to be -0.3. We interpret this relatively low elasticity as reflecting a low propensity for individuals to become more entrepreneurial and create more jobs when labor costs are lower and variable profits are higher.
Jan van Ours, VoxEU: Age, wage, and productivity. Ageing populations are a concern for many developed countries, with increasing dependence on the working population expected. Despite this, there is relatively little research on how productivity changes with age. This column argues that while older people do not run as fast, there is no evidence of a mental productivity decline and little evidence of an increasing pay-productivity gap. The negative effects of ageing on productivity should not be exaggerated.
Edward L. Glaeser, Boston Globe: Why the anti-urban bias? The billions of dollars being spent on infrastructure across the nation provide an opportunity to plan for a better America, but politics-as-usual favors sprawl over city. This anti-urban bias of national policies must end. Over the past 60 years, cities have been hit by a painful policy trifecta: subsidization of highways, subsidization of homeownership, and a school system that creates strong incentives for many parents to leave city borders. Subsidizing transportation decreases the advantage of living close together in cities. It is a mistake to think that spending on trains balances the scales. Cities will always benefit far less than exurbs from transportation because dense areas already have good means of getting around, like walking.
Sara Markowitz, Erik Nesson, Joshua Robinson, NBER: Are Pink Slips Better Than Flu Shots? The Effects of Employment on Influenza Rates. In this paper, we examine whether increases in labor market activities are associated with an increased incidence of the flu. Flu data come from the Centers for Disease Control. We check the robustness of our results using unique data from Google Flu Trends. Using a first-difference two stage least squares estimation approach, we find that a one percentage point increase in the employment rate increases the number of influenza related doctor visits by about 8.1 additional flu-related doctor visits per 1000 doctor visits for all causes. To put this in perspective, on average, 33 additional people out of every 100,000 new employees will have a flu-related doctor visit. The results are robust across several specifications.
Paul Krugman, Princeton: Climate Policy, A Note. I’m trying to do a popular writeup of debates over climate change policy, which meant that I had to get a grip on the big dispute over the timing of action – Nordhaus and other modelers calling for a “climate policy ramp” in which carbon prices start fairly low and rise only gradually, Stern and others calling for a quick rise in prices. I found the discussion hard to follow, so I did what I usually do in such cases – tried to write down a toy model that hopefully clarifies the issues. And it leaves me both understanding and worried about the climate policy ramp.
Sam Dillon, NYT: Panel Proposes Single Standard for All Schools. A panel of educators convened by the nation’s governors and state school superintendents proposed a uniform set of academic standards on Wednesday, laying out their vision for what all the nation’s public school children should learn in math and English, year by year, from kindergarten to high school graduation. The new proposals could transform American education, replacing the patchwork of standards ranging from mediocre to world-class that have been written by local educators in every state. Under the proposed standards for English, for example, fifth graders would be expected to explain the differences between drama and prose, and to identify elements of drama like characters, dialogue and stage directions. Seventh graders would study, among other math concepts, proportional relationships, operations with rational numbers and solutions for linear equations.
Gustavo A. Marrero, Juan G. Rodríguez, ECINEQ: Inequality of opportunity and growth. Theoretical and empirical studies exploring the effects of income inequality upon growth reach a disappointing inconclusive result. This paper postulates that one reason for this ambiguity is that income inequality is actually a composite measure of at least two different sorts of inequality: inequality of opportunity and inequality of returns to effort. These two types of inequality affect growth through opposite channels, so the relationship between income inequality and growth is positive or negative depending on which component is larger. We test this proposal using inequality-of-opportunity measures computed from the PSID database for 23 states of the U.S. in 1980 and 1990. We find robust support for a negative relationship between inequality of opportunity and growth, and a positive relationship between inequality of returns to effort and growth.
Andrew Leigh, ANU: Permanent Income Inequality: Australia, Britain, Germany, and the United States Compared. I find (1) using pre-government income, annual inequality and permanent inequality have grown in Germany and the US, while post-government income inequality has grown in the US; (2) comparing levels of annual post-government income inequality across countries, the ranking was the US, Australia, Britain, Germany; (3) comparing levels of permanent income inequality across countries, the ranking of triennial post-government inequality in the most recent year was the US, Australia, Germany, Britain; (4) in the most recent year, the most mobile country was Australia, while the least mobile was Germany. However, as a comparison of points (2) and (3) demonstrates, mobility had little effect on the overall rankings.
Thomas A. Garrett, Russell M. Rhine St Louis Fed: "Economic Freedom and Employment Growth in U.S. States. We find that states with greater economic freedom – defined as the protection of private property and private markets operating with minimal government interference – experienced greater rates of employment growth. In addition, we find that less restrictive state and national government labor market policies have the greatest impact on employment growth in U.S. states. Except for labor market policies, we find that state employment growth is influenced by state and local government policies, but not the policies of all levels of government, including the national government. Our results suggest that policy-makers concerned with employment should seriously consider the degree to which their own labor market policies, as well as those of the national government, may be limiting economic growth and development in their respective states.
John Cassidy, New Yorker: No Credit. Timothy Geithner’s financial plan is working—and making him very unpopular. “We saved the economy, but we kind of lost the public,” Geithner said. For all the wrath that has descended upon his slight frame, he appears to have succeeded in putting out another inferno. “Why do policymakers screw up financial crises?” he said before I left his office. “They screw up financial crises because the politics are horrible, and that deters action. They are slow and late and tentative and weak because they are scared to death of the politics. But sometimes a policymaker has to say, I’ll take pain now against pain later.”
Jan-Emmanuel De Neve, James H. Fowler, Bruno S. Frey, CESIFO: Genes, Economics, and Happiness. This article presents evidence of a specific gene that predicts subjective well-being. Using data from the National Longitudinal Study of Adolescent Health, we show that individuals with a transcriptionally more efficient version of the serotonin transporter gene (5HTT) are significantly more likely to report higher levels of life satisfaction. Having one or two alleles of the more efficient type raises the average likelihood of being very satisfied with one’s life by 8.5% and 17.3%, respectively. This result may help to explain the stable component of happiness and suggests that genetic association studies can help us to better understand individual heterogeneity in subjective well-being.
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