APRIL 1 2011

10 ex-chairs of the president's Council of Economic Advisers, Politico: As former chairmen and chairwomen of the Council of Economic Advisers, who have served in Republican and Democratic administrations, we urge that the Bowles-Simpson report, “The Moment of Truth,” be the starting point of an active legislative process that involves intense negotiations between both parties. There are many issues on which we don’t agree. Yet we find ourselves in remarkable unanimity about the long-run federal budget deficit: It is a severe threat that calls for serious and prompt attention.

Martin Feldstein, Project Syndicate: China’s Five-Year Plan and Global Interest Rates. The future reduction in China’s saving will mean a reduction in China’s current-account surplus – and thus in its ability to lend to the US and other countries. If the new emphasis on increased consumption shrank China’s saving rate by 5% of its GDP, it would still have the world’s highest saving rate. But a five-percentage-point fall would completely eliminate China’s current-account surplus. The impact on the global capital market would be enormous. With no current-account surplus, China would no longer be a net purchaser of US government bonds and other foreign securities. Moreover, if the Chinese government and Chinese firms want to continue investing in overseas oil resources and in foreign businesses, China will have to sell dollar bonds or other sovereign debt from its portfolio. The net result would be higher interest rates on US and other bonds around the world.

Jesse Bricker et al, Fed: Surveying the Aftermath of the Storm: Changes in Family Finances from 2007 to 2009. The data show signs that families’ behavior may act in some ways as a brake on reviving the economy in the short run. Two things stand out in this regard. First, a large proportion of families in all wealth groups and across the range of changes in wealth expressed the need for greater precautionary savings. In general, compared with families with relative losses, the families with relative gains appeared more pessimistic and cautious before the crisis, and in the 2009 survey they remained cautious even though their wealth had increased. The perceived desire for additional savings is further amplified by answers to open-ended questions about recent and future adjustments to family finances. Second, the data show a tendency for families to respond asymmetrically to changes in wealth. Overall, it appears that families may be relatively reluctant to spend more when asset prices rise and may more readily reduce spending when asset prices fall.

Daniel Cohen, Cécile Valadier, CEPR: 40 Years of Sovereign Debt Crises. The paper compiles a new data base, based on the earlier work by Kray and Nehu, to assess the determinants of sovereign debt crises over the last forty years. A simple statistical analysis of the cause of the crises is performed. It shows that neither the serial defaulter nor the "global crisis" theories of sovereign crises explain much. Sovereign debt crises owe mostly to the level of indebtedness of the countries. About half the risk factor such as we shall compute it originates from this term. The remainder owes for another 25% to the quality of governance of the country, such as captured by the CPIA index which measures indirectly the ability of countries to wither external bad shock. On these fronts, we show that the bulk of countries which were at the center of previous crises are now below the danger zone, which explains why, for them, this crisis was different

Ozkan Eren, Daniel J. Henderson, IZA: Are We Wasting Our Children's Time by Giving Them More Homework? Following an identification strategy that allows us to largely eliminate unobserved student and teacher traits, we examine the effect of homework on math, science, English and history test scores for eighth grade students in the United States. Noting that failure to control for these effects yields selection biases on the estimated effect of homework, we find that math homework has a large and statistically meaningful effect on math test scores throughout our sample. However, additional homework in science, English and history are shown to have little to no impact on their respective test scores.

Thomas Bolli, KOF: The Global Production Frontier of Universities. This paper provides first micro-level evidence of the global university production frontier, allowing to estimate technical efficiencies of 273 top research universities across 29 countries between 2007 and 2009. The estimated input distance function uses undergraduate students, graduate students and citations to capture university outputs and staff to measure inputs. Contrasting two alternative econometric strategies to identify technical efficiency yields relatively stable results. Universities in Switzerland and Israel appear to be very efficient (and indeed they are small are generate a good amount of research) while those in the UK seem particularly inefficient.

Karen A. Kopecky, Jeremy Greenwood, Atlanta Fed: Measuring the Welfare Gain from Personal Computers: A Macroeconomic Approach. The welfare gain to consumers from the introduction of personal computers is estimated here. A simple model of consumer demand is formulated that uses a slightly modified version of standard preferences. The modification permits marginal utility, and hence total utility, to be finite when the consumption of computers is zero, implying that the good won't be consumed at a high enough price. It also bounds the consumer surplus derived from the product. The model is calibrated and estimated using standard national income and product account data. The welfare gain from the introduction of personal computers is in the range of 2 percent to 3 percent of consumption expenditure.

Sietse Bracke, Koen Schoors and Gerd Verschelden, Gent University: No-Fault Divorce and Rent-Seeking. Couples filing for divorce in Belgium have the option to either opt for a no-fault divorce trajectory or a consensual trajectory. We analyse the determinants of divorce trajectory choice and of the resulting post-divorce transfers. The no-fault trajectory is more likely, if spouses are more specialised in either domestic or labour market production. This is consistent with a theory of divorce as rent extraction. Child support payments depend neither on the divorce trajectory nor on alimony transfers or relative incomes, but are driven by the payer's wage and the child(ren)'s residence. Partner alimony transfers are higher for no-fault unilateral divorces with pronounced self sacrifice.

Jinhu Li, Jeremiah Hurley, Philip DeCicca, Gioia Buckley, NBER: Physician Response to Pay-for-Performance: Evidence from a Natural Experiment. We use an administrative data source which covers the full population of the province of Ontario and nearly all the services provided by practicing primary care physicians in Ontario. With an individual-level data set of physicians, we employ a difference-in-differences approach that controls for both "selection on observables" and "selection on unobservables" that may cause estimation bias in the identification.        The results indicate that, while all responses are of modest size, physicians responded to some of the financial incentives but not the others.  The differential responses appear related to the cost of responding and the strength of the evidence linking a service with quality.  Overall, the results provide a cautionary message regarding the effectiveness of pay-for-performance schemes for increasing quality of care.

Elizabeth Ty Wilde, Lily Batchelder, David T. Ellwood, NBER: The Mommy Track Divides: The Impact of Childbearing on Wages of Women of Differing Skill Levels. This paper explores how the wage and career consequences of motherhood differ by skill and timing. Past work has often found smaller or even negligible effects from childbearing for high-skill women, but we find the opposite. Wage trajectories diverge sharply for high scoring women after, but not before, they have children, while there is little change for low-skill women. It appears that the lifetime costs of childbearing, especially early childbearing, are particularly high for skilled women. These differential costs of childbearing may account for the far greater tendency of high-skill women to delay or avoid childbearing altogether.

Julie L. Hotchkiss, M. Melinda Pitts, and Mary Beth Walker, Atlanta Fed: To Work or Not to Work: The Economics of a Mother's Dilemma. Utilizing linked vital statistics, administrative employer, and state welfare records, the analysis in this paper investigates the determinants of a woman's intermittent labor force decision at the time of a major life event: the birth of a child. The results indicate that both direct and opportunity labor market costs of exiting the workforce figure significantly into that decision. Further, the analysis reveals the importance of including information about the mother's prebirth job when making inferences about the role various demographics play in the intermittent labor force decision.

Friedhelm Pfeiffer, Nico Johannes Schulz, ZEW: Gregariousness, interactive jobs and wages. Gregariousness is an important aspect of human life with implications for labour market outcomes. The paper examines, to the best of our knowledge for the first time for Germany, gregariousness and social interaction at the workplace and associated wage differentials. Our empirical findings with samples from the German Socio-Economic Panel (SOEP) demonstrate that gregarious people more often work in jobs with social interaction. Furthermore, females tend to work more often in interactive jobs compared to males. There is evidence that working in an interactive job is associated with a compensating negative wage differential of 7 percent for women and non for men.