DECEMBER 3 2010

Martin Feldstein, Project Syndicate: Quantitative Easing and the Renminbi. Greater scope for renminbi appreciation comes at a good time for China. A stronger renminbi would help to reduce rising inflationary pressure in China by reducing the cost of imports, which would also increase Chinese households’ real incomes – a key goal of China’s new five-year plan. In short, the Fed’s policy of quantitative easing is likely to accelerate the rise of the renminbi – an outcome that is in China’s interest no less than it is in America’s. But don’t expect US officials to proclaim that goal openly, or Chinese officials to express their gratitude.

Robert Barro, Free exchange Blog: Thoughts on QE2. My conclusion is that QE2 may be a short-term expansionary force, thereby lessening concerns about deflation. However, the Treasury can produce identical effects by changing the maturity structure of its outstanding debts. The downside of QE2 is that it intensifies the problems of an exit strategy aimed at avoiding the inflationary consequences of the Fed’s vast monetary expansion. The Fed is over-confident about its ability to manage the exit strategy; in particular, it is wrong to view increases in interest rates paid on reserves as a new and more effective instrument for accomplishing a painless exit.

Paul Krugman, NYT: Eating the Irish. Most people know Swift as the author of “Gulliver’s Travels.” But recent events have me thinking of his 1729 essay “A Modest Proposal,” in which he observed the dire poverty of the Irish, and offered a solution: sell the children as food. “I grant this food will be somewhat dear,” he admitted, but this would make it “very proper for landlords, who, as they have already devoured most of the parents, seem to have the best title to the children.” O.K., these days it’s not the landlords, it’s the bankers — and they’re just impoverishing the populace, not eating it. But only a satirist — and one with a very savage pen — could do justice to what’s happening to Ireland now.

J. Bradford DeLong, Project Syndicate: The Retreat of Macroeconomic Policy. I would confidently lecture only three short years ago that the days when governments could stand back and let the business cycle wreak havoc were over in the rich world. No such government today, I said, could or would tolerate any prolonged period in which the unemployment rate was kissing 10% and inflation was quiescent without doing something major about it. I was wrong. That is precisely what is happening. How can the US have a large political movement – the Tea Party – pushing for the hardest of hard-money policies when there is no hard-money lobby with its wealth on the line? How is it that the unemployed, and those who fear they might be the next wave of unemployed, do not register to vote. Economic questions abound, too. Why are the principles of nominal income determination, which I thought largely settled since 1829, now being questioned?

Bastani, Spencer, Blomquist, Sören, Micheletto, Luca, Uppsala Center for Fiscal Studies: The Welfare Gains of Age Related Optimal Income Taxation. Using a calibrated overlapping generations model we quantify the welfare gains of an age dependent income tax. Agents face uncertainty regarding future abilities and can by saving transfer consumption across periods. The welfare gain of switching from an age-independent to an age-dependent nonlinear tax amounts in our benchmark model to around three percent of GDP. The gains are particularly high when there are restrictions on debt policy. The gains of using a nonlinear- as opposed to a linear tax are even larger. Surprisingly, it is of secondary importance to optimally choose the tax on interest income.

Alberto Alesina, Paola Giuliano, Nathan Nunn, Harvard: The Origins of Gender Roles: Women and the Plough. This paper studies the historic origins of current differences in norms and beliefs about the role of women in society. We show that, consistent with anthropological hypotheses, societies with a tradition of plough agriculture tend to have the belief that the natural place for women is inside the home and the natural place for men is outside the home. Looking across countries, subnational districts, ethnic groups and individuals, we identify a link between historic plough-use and a number of outcomes today, including female labor force participation, female participation in politics, female ownership of firms, the sex ratio and self-expressed attitudes about the role of women in society. Our identification exploits variation in the historic suitability of the environment of ancestors for growing crops that differentially benefitted from the adoption of the plough. We examine culture as a mechanism by looking at first and second generation immigrants with different cultural backgrounds living within the US.

Jeffrey A. Flory, Andreas Leibbrandt, John A. List, NBER: Do Competitive Work Places Deter Female Workers? A Large-Scale. Natural Field Experiment on Gender Differences in Job-Entry Decisions. Recently an important line of research using laboratory experiments has provided a new potential reason for why we observe gender imbalances in labor markets: men are more competitively inclined than women. Whether, and to what extent, such preferences yield differences in naturally-occurring labor market outcomes remains an open issue. We address this question by exploring job-entry decisions in a natural field experiment where we randomized nearly 7,000 interested job-seekers into different compensation regimes. By varying the role that individual competition plays in setting the wage, we are able to explore whether competition, by itself, can cause differential job entry. The data highlight the power of the compensation regime in that women disproportionately shy away from competitive work settings.

Martin Marshall, McLoughlin, BMJ Blog: How do patients use information on health providers? In this paper, we present a significant challenge to those who believe that providing information to patients to enable them to make choices between providers will be a major driver for improvement in the near or medium term," they write. We suggest that, for the foreseeable future, presenting high quality information to patients should be seen as having the softer and longer term benefit of creating a new dynamic between patients and providers, rather than one with the concrete and more immediate outcome of directly driving improvements in quality of care.

Tigran Melkonyan, Mark Pingle, University of Nevada: To Believe or Not Believe… or Not Decide: A Decision-Theoretic Model of Agnosticism. Using basic decision-theory, we construct a theory of agnosticism, where agnosticism is defined as choosing not to choose a religion. The theory indicates agnosticism can be supported as a rational choice if (a) adopting agnosticism provides in-life benefits relative to any religion, (b) the perceived payoff for agnosticism after death is not too much less than any religion, (c) no religion has a high perceived likelihood of truth, (d) probability of death is neither too high nor too low, or (e) it is less costly to switch from agnosticism to a given religion than from one religion to another, while at the same time there is a reasonable likelihood an informative signal may be received in life as to the truth of various religions.

Bradley J. Ruffle, Ze'ev Shtudiner, Ben-Gurion University: Are Good-Looking People More Employable? Job applicants in Europe and in Israel increasingly imbed a headshot of themselves in the top corner of their CVs. We sent 5312 CVs in pairs to 2656 advertised job openings. In each pair, one CV was without a picture while the second, otherwise almost identical CV contained a picture of either an attractive male/female or a plain-looking male/female. Employer callbacks to attractive men are significantly higher than to men with no picture and to plain-looking men, nearly doubling the latter group. Strikingly, attractive women do not enjoy the same beauty premium. In fact, women with no picture have a significantly higher rate of callbacks than attractive or plain-looking women. We explore a number of explanations and provide evidence that female jealousy of attractive women in the workplace is a primary reason for the punishment of attractive women.