OCTOBER 7 2011

Kenneth Rogoff, VoxEU: The Wrong Tax for Europe. Europe is already in pickle, so why not add more vinegar? That seems to be the thinking behind the European Commission’s proposed financial transactions tax (FTT) – the Commission’s latest response to Europe’s festering growth and financing problems.

Ed Yardeni, WSJ Blog: Europe’s Ship of Fools. The ship of fools is an allegory that has long been a fixture in Western literature and art. It depicts a vessel packed with clueless passengers who are so obsessed with themselves that they don’t realize that their ship has no pilot and is either on a cruise to nowhere or sinking. That certainly describes what is happening in Europe. Here’s the latest:

Fabius Maximus, RGE Economonitor:  Is Europe Primed for Chaos, as It Was in July 1914? Europe nears the brink, with the potential for a severe crisis if its leaders cannot agree on a solution before the G-20 meeting in Cannes on November 3-5.  The clock ticks.  Here we examine the situation, and seek relevant historical analogies.

Hans-Werner Sinn, VoxEU: How to rescue the euro: Ten commandments. No simple solution to the euro crisis exists. This column argues the heart of the Eurozone’s woe is a balance-of-payments crisis whose solution requires real adjustment of prices and wages in the periphery countries. It proposes Ten Commandments that balance the need for discipline with the need to minimise panic when a crisis does strike.

Peter Boone, Simon Johnson, NYT Blog: The 4 Trillion-Euro Fantasy. Putting in place a huge financial package is not enough. Policies have to adjust across the troubled euro-zone countries so that nations stop accumulating debt, and the periphery moves rapidly from being among the least competitive nations in the euro area to the most competitive — and this includes lower real wages, even if debts are restructured appropriately. The European leadership is a long way from even recognizing this reality, let alone talking about it in public.

Dieter Bräuninger, Christine Majowski, DBresearch: Labour mobility in the euro area. Migration flows have responded to high unemployment in the euro periphery. In Spain, for instance, the immigration surplus has shrunk from upwards of 700,000 in 2007 to a scant 63,000 in 2010. Without the reversal in the migration trend unemployment in Spain would be up to 1.7 percentage points higher and in Ireland as much as 3.5 points. Europeans are apparently becoming more willing to relocate. The potential for internal labour migration is particularly high among young, wellqualified workers, who are especially hard hit by high unemployment in the peripheral countries despite their good qualifications.

David W. Johnston, Wang-Sheng Lee, IZA: Climbing the Job Ladder: New Evidence of Gender Inequity. An explanation for the gender wage gap is that women are less able or less willing to 'climb the job ladder.' However, the empirical evidence on gender differences in job mobility has been mixed. Focusing on a subsample of younger, university-educated workers from an Australian longitudinal survey, we find strong evidence that the dynamics of promotions and employer changes worsen women's labour market position.

Roland G. Fryer, Jr, Devah Pager, Joerg L. Spenkuch, NBER:  Racial Disparities in Job Finding and Offered Wages. The extent to which discrimination can explain racial wage gaps is one of the most divisive subjects in the social sciences.  Using a newly available dataset, this paper develops a simple empirical test which, under plausible conditions, provides a lower bound on the extent of discrimination in the labor market.  Taken at face value, our estimates imply that differential treatment accounts for at least one third of the black-white wage gap. We argue that the patterns in our data are consistent with a search-matching model in which employers statistically discriminate on the basis of race when hiring unemployed workers, but learn about their marginal product over time.  However, we cannot rule out other forms of discrimination.

Daniela Glocker, Viktor Steiner, CEPR: Returns to Education Across Europe. Incentives to invest in higher education are affected by both the direct wage effect of human capital investments and the indirect wage effect resulting from lower unemployment risks and shorter spells in unemployment associated with higher educated. We analyse the returns to education in Austria, Germany, Italy, Sweden and the United Kingdom, countries which differ significantly regarding both their education systems and labour market structure. We estimate augmented Mincerian wage equations accounting for the effects of unemployment on individual wages using EU-SILC data. Across countries we find a high variation of the effect of education on unemployment duration. Overall, the returns to education are estimated to be the highest in the UK, and the lowest for Sweden. A wage decrease due to time spent in unemployment results in a decline in the hourly wages in Austria, Germany and Italy.

David John Mckenzie, World Bank Development Research Group: The Impact of Economics Blogs. There is a proliferation of economics blogs, with increasing numbers of economists attracting large numbers of readers, yet little is known about the impact of this new medium. Using a variety of experimental and non-experimental techniques, we try to quantify some of their effects. First, links from blogs cause a striking increase in the number of abstract views and downloads of economics papers. Second, blogging raises the profile of the blogger (and his institution) and boosts their reputation above economists with similar publication records. Finally, we find that a blog can transform attitudes about some of the topics it covers.