Richard W. Evans,
Laurence J. Kotlikoff, Kerk L. Phillips, NBER: Game Over: Simulating
Unsustainable Fiscal Policy. Fiscal sustainability
is one of the most pressing policy issues of our time. Yet it remains difficult
to quantify. Official debt is plagued with a number of measurement difficulties
since its measurement reflects the choice of words, not policies. And forming
the fiscal gap-the imbalance in the government's intertemporal budget-requires
strong discount rate assumptions. An alternative approach, taken here, is
specifying a stochastic general equilibrium model and determining via
simulation how long it takes for the economy to reach game over-the point where
current policy can no longer be maintained. Our simulations, based on an OLG
model calibrated to the U.S. economy, produce an average duration to game over
of roughly one century, with a 35 percent chance of reaching the fiscal limit
in roughly 30 years. The prospect of man-made economic collapse produces large
equity premia, like those observed in the data. Our simulations show that both
the fiscal gap and the equity premium rise as the economy gets closer to
hitting its fiscal limit, suggesting that the fiscal gap and the equity premium
may be good indicators of unsustainable policy.
Ruud de Mooij,
Michael Keen, NBER: 'Fiscal Devaluation' and Fiscal Consolidation: The VAT in
Troubled Times. This paper focuses on two core tax design
issues that arise in addressing current fiscal challenges It first explores the
idea, prominent in troubled Eurozone countries, of a ‘fiscal devaluation:’
shifting from social contributions to the VAT as a way to mimic a nominal
devaluation. Empirical evidence is presented which suggests that in Eurozone
countries this may indeed improve the trade balance quite sizably in the
short-run, though, as theory predicts, the effects eventually disappear. The
paper then assesses the wider scope for VAT reform in meeting fiscal
consolidation needs, developing and beginning to apply a methodology for
finding additional VAT revenue in ways less distortionary and fairer than
further raising the standard rate.
N. Gregory Mankiw, NYT: Capital Gains, Ordinary Income and Shades of
Gray. But put that aside. If we are going to tax capital
gains at a lower rate, one question necessarily arises: What is a capital gain,
and how can we distinguish it from ordinary income? The answer seems simple. If
you have a job, the money you are paid for your work is ordinary income. If you
buy an asset at one time and sell it later for a higher price, the profit you
made from holding it is a capital gain. But is it really that easy? Consider
five examples, and see if you can identify what is ordinary income and what is
a capital gain.
Torben M.
Andersen, Aarhus University: Social policies and activation in the Scandinavian
welfare model: the case of Denmark. Scandinavian
countries are characterized by a generous tax-financed social safety net which
provides insurance and performs a redistributive role. While contributing to
lower inequality it may imply that incentives to work are low, and yet
employment rates are high. How have the Scandinavian countries been able to
reconcile social objectives with a high employment level? It is argued that the
Scandinavian welfare model has a strong employment focus both because it is an
important element in social policy based on social inclusion, but also because
a collective welfare arrangement is only financially viable if (private)
employment is sufficiently high. To ensure this, the social safety net includes
a number of employment conditionalities (active labour market
policies/workfare) to balance income protection with an employment focus. These
policies are discussed using Denmark as an example and empirical evidence is
presented. The criticism of workfare is also briefly discussed.
Tuomas Pekkarinen, IZA: Gender Differences
in Education. This
paper surveys the trends in gender gaps in education, their causes and
potential policy implications. I show that female educational attainment has
surpassed, or is about to surpass, male educational attainment in most
industrialized countries. These gaps reflect male overrepresentation among
secondary school drop-outs and female overrepresentation among tertiary
education students and graduates. Existing evidence suggests that this pattern
is a result of a combination of increasing returns to education and lower
female effort costs of education. Widening gender gap in education combined
with recent wage and employment polarization will likely lead to widening
inequalities and is linked to declining male labor force participation. The
paper discusses evidence on educational policies that both widen and reduce
gender gaps in educational outcomes.
Sara Markowitz et
al, NBER: Estimating the Relationship between Alcohol Policies and Criminal
Violence and Victimization. Violence is one of
the leading social problems in the United States. The development of
appropriate public policies to curtail violence is confounded by the
relationship between alcohol and violence. In this paper, we estimate the
propensity of alcohol control policies to reduce the perpetration and
victimization of criminal violence. We measure violence with data on individual
level victimizations from the U.S. National Crime Victimization Survey. We
examine the effects of a number of different alcohol control policies in
reducing violent crime. These policies include the retail price of beer, drunk
driving laws and penalties, keg laws, and serving and selling laws. We find
some evidence of a negative relationship between alcohol prices and the
probability of alcohol or drug related assault victimizations. However, we find
no strong evidence that other alcohol policies are effective in reducing
violent crimes. These results provide policy makers with guidance on potential
approaches for reducing violence through alcohol beverage control.
Bruno S Frey,
Jana Gallus,VoxEU: The world appears to be unfair. Those who are
prettier earn a higher salary and are also happier. This column argues it is
still not hopeless for those less blessed with looks. Appropriate clothing,
hairstyles, and good teeth can help, as can choosing a profession where
expertise is clearly central and beauty of less importance.
Jason M Fletcher, IZA: The Effects of
Personality Traits on Adult Labor Market Outcomes: Evidence from Siblings. While large literatures
have shown that cognitive ability and schooling increases employment and wages,
an emerging literature examines the importance of so-called "non-cognitive
skills" in producing labor market outcomes. However, this smaller
literature has not typically used causal methods in estimating the results. One
source of heterogeneity that may play an important role in producing both
personality and other non-cognitive skills and labor market outcomes is family
background, including genetic endowments. This paper is the first to use
sibling differences to estimate the effects of personality on employment and
wages and is also able to control for many other sources of heterogeneity,
including attractiveness, cognitive ability, schooling, occupation, and other factors.
Overall, the findings suggest that personality measures are important
determinants of labor market outcomes in adulthood and that the results vary
considerably by demographic group. The findings also! highlight the potential
role of extraversion in leading to favorable labor market outcomes, which has
not been documented in many other studies.
AGING AND RETIREMENT
Ehsan Latif, University of Toronto: The Impact of Retirement on Health
in Canada. This study estimates the impact of
retirement on subsequent health outcomes as measured by self-reported health
status. The empirical study is based on seven longitudinal waves of the
Canadian National Population Health Survey, spanning 1994 through 2006. To
account for biases due to unobserved individual-specific heterogeneity, this
study uses a fixed-effects method. The results indicate that retirement has a
positive but insignificant impact on self-reported health status. The study further
examined this issue using different subgroups based on gender and income and
again found that retirement has no significant impact on health status.
MARS 16 2012
Greg Smith, NYT: Why I Am Leaving Goldman Sachs. Today is my last day
at Goldman Sachs. After almost 12 years at the firm — first as a summer intern
while at Stanford, then in New York for 10 years, and now in London — I believe
I have worked here long enough to understand the trajectory of its culture, its
people and its identity. And I can honestly say that the environment now is as
toxic and destructive as I have ever seen it.
Russell Cooper,
NBER: Exit from a Monetary Union through Euroization: Discipline without Chaos. This paper studies the role of exit from a
monetary union during a debt crisis. A monetary union, such as the European
Monetary Union, needs to establish a procedure for exit as a tool to cope with
debt default. The paper studies various forms of exit and argues that
"Euroization" is both a credible and effective means of punishment
for countries in default.
Laura Abramovsky,
Rachel Griffith, Helen Miller, VoxEU: Offshoring of high-skilled workers is not
a zero-sum game. Multinational firms outsourcing or offshoring
their operations to developing countries is a problem as old as globalisation.
This column looks at the effect on high-skilled labour in the home country. It
presents evidence that, on average, when firms start employing high-skilled
workers offshore, they also increase the number of this type of worker employed
at home.
Edward P. Lazear,
James R. Spletzer, NBER: Hiring, Churn and the Business Cycle. Churn, defined as replacing departing workers
with new ones as workers move to more productive uses, is an important feature
of labor dynamics. The majority of hiring and separation reflects churn rather
than hiring for expansion or separation for contraction. Using the JOLTS data,
we show that churn decreased significantly during the most recent recession
with almost four-fifths of the decline in hiring reflecting decreases in churn.
Reductions in churn have costs because they reflect a reduction in labor
movement to higher valued uses. We estimate the cost of reduced churn to be
$208 billion. On an annual basis, this amounts to about .4% of GDP for a period
of 3 1/2 years.
Jennifer Hunt et
al, NBER: Why Don't Women Patent? We investigate
women's underrepresentation among holders of commercialized patents: only 5.5%
of holders of such patents are female. Using the National Survey of College
Graduates 2003, we find only 7% of the gap is accounted for by women's lower
probability of holding any science or engineering degree, because women with
such a degree are scarcely more likely to patent than women without.
Differences among those without a science or engineering degree account for
15%, while 78% is accounted for by differences among those with a science or engineering
degree. For the latter group, we find that women's underrepresentation in
engineering and in jobs involving development and design explain much of the
gap; closing it would increase U.S. GDP per capita by 2.7%.
Alessandro
Bucciol, Marco Piovesan Pay Dispersion and Work Performance. The effect of
intra-firm pay dispersion on work performance is controversial and the
empirical evidence is mixed. High pay dispersion may act as an extra incentive
for employees' effort or it may reduce motivation and team cohesiveness. These
effects can also coexist and the prevalence of one effect over the other may
depend on the use of different definitions of what constitutes a
"team." For this paper we collected a unique dataset from the men's
major soccer league in Italy. For each match we computed the exact pay
dispersion of each work team and estimated its effect on team performance. Our
results show that when the work team is considered to consist of only the
players who contribute to the result, high pay dispersion has a detrimental
impact on team performance. Several robustness checks confirm this result. In
addition, we show that enlarging the definition of work team causes this effect
to disappear or even become positive. Finally, we find that the detrimental
effect of pay dispersion is due to worst individual performance, rather than a
reduction of team cooperation.
Jason DeBacker, Bradley Heim, Vasia Panousi, Ivan Vidangos
San Francisco Fed: Rising Inequality: Transitory or Permanent? New Evidence
from a U.S. Panel of Household Income. We use a new and
large panel dataset of household income to shed light on the permanent versus
transitory nature of rising inequality in individual male labor earnings and in
total household income, both before and after taxes, in the United States over
the period 1987-2006. Due to the quality and the significant size of our
dataset, we are able to conduct our analysis using rich and precisely estimated
error-components models of income dynamics. Our main specification finds
evidence for a quadratic heterogeneous income profiles component and a random
walk component in permanent earnings, and for a moving-average component in
autoregressive transitory earnings. We find that the increase in inequality
over our sample period was entirely permanent for male earnings, and
predominantly permanent for household income. We also show that the tax system,
though reducing inequality, nonetheless did not materially affect its
increasing trend. Furthermore, we compare our model-based findings against
those of simpler, non-model based inequality decomposition methods. We show
that the results for the trends in the evolution of the permanent and
transitory variances are remarkably similar across methods, whereas the results
for the shares of those variances in cross-sectional inequality differ widely.
Further investigation into the sources of these differences suggests that
simpler methods produce erroneous decompositions because they cannot flexibly
capture the relative degree of persistence of the transitory component of
income.
International Monetary Fund: IMF News and Data for the iPad. The IMF News and Data
lets you access the latest International Monetary Fund news in 6 different
languages and chart and view the latest World Economic Outlook (WEO) data on global
economic indicators. The IMF News and
Data will be of use to students, professors, economists, researchers and anyone
looking to learn more about global economic news, indicators, and trends.
AGING AND RETIREMENT
A.C.S., Free
Exchange Blog: This old stock market. Aging populations in
America and Europe raise many economic concerns. A popular one is whether aging
baby boomers will tank the stock market. That’s story in this Wall Street
Journal article, which says that when baby boomers bought stock to fund their
retirement, that drove up share prices in the 1990s. Now, on the cusp of
retirement, they will sell their shares so prices must fall. This theory
appears to be confirmed by a figure from the San Francisco Fed, which shows a
strong correlation between the price/earnings ratio and what they call the M/O
ratio, the ratio of people age 40 to 49 to people age 60 to 69.
Grip Andries et
al, Maastricht University: Retirement
and cognitive development: are the retired really inactive? This paper uses longitudinal test data to
analyze the relation between retirement and cognitive development. Controlling
for individual fixed effects, we find that retirees face greater declines in
information processing speed than those who remain employed. However,
remarkably, their cognitive flexibility declines less, an effect that appears
to be persistent 6 years after retirement. Both effects of retirement on
cognitive development are comparable to those of a five to six-year age
difference. They cannot be explained by (1) a relief effect after being
employed in low-skilled jobs, (2) mood swings or (3) changes in lifestyle.
Controlling for changes in blood pressure, which are negatively related to
cognitive flexibility, we still find lower declines in cognitive flexibility
for retirees. Since the decline in information processing speed after
retirement holds particularly for the low educated, activating these persons
after retirement could lower the social costs of an aging society.
Antonio Filippin, Jan C. van Ours, IZA: Run
for Fun: Intrinsic Motivation and Physical Performance. We use data from the
24-hours Belluno run which has the unique characteristic that participants are
affiliated with teams and run for an hour. This allows us not only to study the
individual relationship between age and performance but also to study group
dynamics in terms of accessions to and separations from teams in a manner that
closely resembles workers and firms when individual productivity would have
been perfectly observable. From our analysis we conclude that individual
performance goes down with age, although the speed-age gradient is rather flat.
Group performance goes down with age as well, but interestingly a
counterbalancing force emerges, namely team dynamics that are driven by
performance of runners who enter and leave.
MARS 9 2012
Brad
Plumer, Wonkblog: Oil could make the crisis in Europe so much worse. Europe is getting hammered
by soaring oil prices harder than just about anywhere else. Not good news for a
continent already mired in recession. And the graph below is especially
striking — the euro zone countries with the worst trade imbalances (and, not
coincidentally, the worst debt crises) are also particularly dependent on
foreign oil and gas:
Barry Eichengreen, Kevin H O’Rourke, VoxEU:
A tale of two depressions redux. The debate over
stimulus versus austerity continues unabated. This column shows that, while
industrial production and trade recovered much more quickly than during the
Great Depression, both series now appear to be slowing down. It suggests that,
as St Augustine would have said had he been managing director of the IMF, there
is a case for additional fiscal consolidation and monetary normalisation, but
not yet.
Maurice Obstfeld, NBER: Does the Current
Account Still Matter? Do global current account imbalances still matter in
a world of deep international financial markets where gross two-way financial
flows often dwarf the net flows measured in the current account? Contrary to a
complete markets or “consenting adults” view of the world, large current
account imbalances, while very possibly warranted by fundamentals and welcome,
can also signal elevated macroeconomic and financial stresses, as was arguably
the case in the mid-2000s. Furthermore, the increasingly big valuation changes
in countries’ net international investment positions, while potentially
important in risk allocation, cannot be relied upon systematically to offset
the changes in national wealth implied by the current account. The same factors
that dictate careful attention to global imbalances also imply, however, that
data on gross international financial flows and positions are central to any
assessment of financial stability risks. The balance sheet mismatches of
leveraged entities provide the most direct indicators of potential instability,
much more so than do global imbalances, though the imbalances may well be a
symptom that deeper financial threats are gathering.
Michael D. Bordo, Christopher M. Meissner,
NBER: Does Inequality Lead to a Financial Crisis? The recent global
crisis has sparked interest in the relationship between income inequality,
credit booms, and financial crises. Rajan (2010) and Kumhof and Ranciere (2011)
propose that rising inequality led to a credit boom and eventually to a
financial crisis in the US in the first decade of the 21st century as it did in
the 1920s. Data from 14 advanced countries between 1920 and 2000 suggest these
are not general relationships. Credit booms heighten the probability of a
banking crisis, but we find no evidence that a rise in top income shares leads
to credit booms. Instead, low interest rates and economic expansions are the
only two robust determinants of credit booms in our data set. Anecdotal
evidence from US experience in the 1920s and in the years up to 2007 and from
other countries does not support the inequality, credit, crisis nexus. Rather,
it points back to a familiar boom-bust pattern of declines in interest rates,
strong growth, rising credit, asset price booms and crises.
Marina
Azzimonti et al, Philadelphia Fed: Financial Globalization, Inequality, and the
Raising of Public Debt. During the last three decades, the stock of
government debt has increased in most developed countries. During the same
period, we also observe a significant liberalization of international financial
markets and an increase in income inequality in several industrialized
countries. In this paper we propose a multicountry political economy model with
incomplete markets and endogenous government borrowing and show that
governments choose higher levels of public debt when financial markets become
internationally integrated and inequality increases. We also conduct an
empirical analysis using OECD data and find that the predictions of the
theoretical model are supported by the empirical results.
Olaf
van Vliet and Henk Nijboer, MPRA: Flexicurity in the European Union:
Flexibility for Outsiders, Security for Insiders. There is little
insight into whether flexicurity policies have been adopted across the European
Union. Therefore, the aim of this paper is to analyse to what extent labour
market policies have been reformed along the lines of the flexicurity concept
across 18 European countries over the period 1985-2008. Focusing on the main
axes of the flexicurity concept, new datasets are used to examine changes in
employment protection legislation, unemployment benefits and active labour
market policies. Data on the strictness of employment regulation indicate that
reforms have been influenced by labour market insiders, since the level of
flexibility has been increased more for temporary employment, the labour market
outsiders, than for regular employment, the insiders. Although gross
unemployment replacement rates suggest that unemployment benefits have become
more generous, net replacement rates indicate that the level of income security
from benefits actually has been decreased. Moreover, data illustrate that
larger shares of European labour forces have temporary contracts. As such, the
gap between insiders and outsiders on the labour market has been increased.
Timothy Halliday, IZA: Earnings Growth and
Movements in Self-Reported Health. We employ data from the Panel Study of Income
Dynamics to investigate income to health causality. To account for unobserved
heterogeneity, we focus on the relationship between earnings growth and changes
in self-reported health status. Causal claims are predicated upon appropriate
moment restrictions and specification tests of their validity. We find evidence
of Granger-type causality running from income to health for married men but not
for women or single men. These effects are more pronounced for younger men and
the bottom quartile of the earnings distribution. The former may be the consequence
of permanent earnings shocks, whereas the latter may be the consequence of job
loss.
Florencia López Bóo, Martín A. Rossi,
Sergio Urzua, IZA: The Labor Market Return to an Attractive Face: Evidence from
a Field Experiment. We provide new evidence on the link between beauty
and hiring practices in the labor market. Specifically, we study if people with
less attractive faces are less likely to be contacted after submitting a
resume. Our empirical strategy is based on an experimental approach. We sent
fictitious resumes with pictures of attractive and unattractive faces to real
job openings in Buenos Aires, Argentina. We find that attractive people receive
36 percent more responses (callbacks) than unattractive people. Given the
experimental design, this difference can be attributed to the exogenous
manipulation of facial attractiveness of our fake job applicants.
Jo Ritzen, Klaus F. Zimmermann, IZA: Fading
Hope in the US. A substantial literature claims that the strong
increase in inequality over the last decade in countries such as the US would
lead to a collapse of society. Fading hopes in the population seem to confirm
this. The paper rejects this interpretation since the decline in hopes cannot
be traced back to rising inequality.
AGING AND RETIREMENT
Pekka
Martikainen, Mikko Myrskylä, Max Planck Institute, Lifespan variation by occupational class:
compression or stagnation over time? Adult lifespan variation in most western
countries has stagnated since the 1960s, despite continued improvements in
longevity. Cross-sectional analyses, however, find that in the 1990s higher
socio-economic position was associated with lower lifespan variation. Trends in
this association over time are unknown. We investigated trends in lifespan
variation over four decades by occupational social class (manual, lower
non-manual, upper non-manual) using Finnish register data (1971-2007). We
performed age and cause-of-death decompositions of lifespan variation for each
sex (a) by occupational class over time and (b) between occupational classes at
a shared life expectancy. We found that although all occupational classes
experienced increases in life expectancy, manual workers had stagnating
lifespan variation over time while the higher occupational groups experienced
mortality compression. These differences were caused by diverging trends in
early adult mortality: all occupational classes experienced similar trends in
lifespan variation at older ages, but variation in early adult mortality
increased for all classes except the highest category. The high and stagnant
lifespan variation of the manual class was mostly due to higher early adult
mortality from external causes. These results suggest that mortality
compression can be compatible with increases in life expectancy by tackling
inequalities in early adult mortality.
Austin
Nichols, Urban Institute: Do Financial Planners Advise Us to Save Too Much for
Retirement? There is abundant advice about how much to save, much
of which urges individuals to aim to replace 80 percent of their preretirement
pretax income. However, those who wait to save for retirement and follow this
rule of thumb would save far too much of their gross income, and many would see
their annual resources spike upward when they retire. The constant savings rate
required to equalize consumption across the preretirement and postretirement
years generally is generally much lower than the 80 percent rule.
Melissa
M. Favreault et al, Urban Institute: Boomers' Retirement Income Prospects. The lackluster
economy, eroding traditional pensions, and volatile stock market suggest that
baby boomers - those born between 1945 and 1965 - face increasingly uncertain
retirements. Our projections show that lower - and moderate-income boomers will
continue to rely on Social Security for most of their retirement income. While
the projections reflect some good news - women will reap the rewards of working
and earning more than previous generations - they also raise alarms. Between 30
and 40 percent of boomers will not have enough income at age 70 to replace 75
percent of their preretirement earnings, a common standard for measuring
retirement income adequacy.
MARS 2 2012
Tim
Geithner, WSJ: Financial Crisis Amnesia. My wife occasionally looks up from the
newspaper with bewilderment while reading another story about people in the
financial world or their lobbyists complaining about Wall Street reform or
claiming they didn't need the Troubled Asset Relief Program. She reminds me of
the panicked calls she answered for me at home late at night or early in the
morning in 2008 from the then-giants of our financial system. We cannot afford
to forget the lessons of the crisis and the damage it caused to millions of
Americans. Amnesia is what causes financial crises. These reforms are worth
fighting to preserve.
Ashoka Mody, Franziska Ohnsorge, Damiano Sandri, VoxEU: Precautionary savings
in the Great Recession. Uncertainty rose sharply during the Great Recession,
as did saving rates. This column shows that these two developments were
related. Using a panel of OECD countries, it estimates that at least two-fifths
of the increase in households’ saving rates between 2007 and 2009 was due to
increased uncertainty about labour-income prospects. It adds that restoring
higher levels of consumption and aggregate demand will require
employment-friendly social insurance and reduced policy-induced uncertainty.
Christina and David Romer, UCLA: The incentive effects of marginal tax
rates. This paper uses the interwar period in the
United States as a laboratory for investigating the incentive effects of
changes in marginal income tax rates. Marginal rates changed frequently and
drastically in the 1920s and 1930s, and the changes varied greatly across
income groups at the top of the income distribution. We examine the effect of
these changes on taxable income using time-series/cross-section analysis of
data on income and taxes by small slices of the income distribution. We find
that the elasticity of taxable income to changes in the log after-tax share
(one minus the marginal rate) is positive but small (approximately 0.2) and
precisely estimated (a t-statistic over 6). The estimate is highly robust. We
also examine the time-series response of available indicators of investment and
entrepreneurial activity to changes in marginal rates. We find suggestive
evidence of an impact on business formation, but no evidence of an important
impact on other indicators.
Laurent Gobillon, Thierry Magnac, Harris
Selod, IZA: Do Unemployed Workers Benefit from Enterprise Zones? The French
Experience. This paper presents an impact evaluation of
the French enterprise zone program which was initiated in 1997 to help
unemployed workers find employment by granting a significant wage-tax exemption
(about one third of total labor costs) to firms hiring at least 20% of their
labor force locally. Drawing from a unique geo-referenced dataset of unemployment
spells in the Paris region over an extensive period of time (1993-2003), we are
able to measure the direct effect of the program on unemployment duration,
distinguishing between short- and medium-term effects. This is done by
implementing an original two-stage empirical strategy using individual data in
the first stage and aggregate data and conditional linear matching techniques
in the second stage. We show that although the enterprise zones program tended
to "pick winners", it is likely to be cost-ineffective. It had a
small but significant effect on the rate at which unemployed workers find a job
(which is increased by a modest 3 percent). This effect is localized and
significant only in the short run (i.e. at best during the 3 years that follow
the start of the policy).
David Card, Christian Dustmann and Ian Preston, Norface Migration:
Immigration, Wages, and Compositional Amenities. There is strong
public opposition to increased immigration throughout Europe. Given the modest
economic impacts of immigration estimated in most studies, the depth of
antiimmigrant sentiment is puzzling. Immigration, however, does not just affect
wages and taxes. It also changes the composition of the local population,
threatening the “compositional amenities” that natives derive from their
neighborhoods, schools, and workplaces. In this paper we use a simple latent
factor model, combined with data for 21 countries from the 2002 European Social
Survey (ESS), to measure the relative importance of economic and compositional
concerns in driving opinions about immigration policy. The ESS included a
unique battery of questions on the labor market and social impacts of
immigration, as well as on the desirability of increasing or reducing immigrant
inflows. We find that compositional concerns are 2-5 times more important in
explaining variation in individual attitudes toward immigration policy than
concerns over wages and taxes. Likewise, most of the difference in opinion
between more- and lesseducated respondents is attributable to heightened
compositional concerns among people with lower education.
Ron Haskins, Peter H. Schuck, Brookings: Welfare Reform Worked. According to Census
Bureau data, between 1996 and 2000, the percentage of never-married mothers in
jobs increased by about a third (to 66%), while the poverty rate for these
mothers and their children declined by about a third (to 40%). For the poorest
of the poor, this large an improvement based on their own efforts was
unprecedented. Since then, two recessions have reduced these gains somewhat;
their employment rate is down to 58.7% (still better than for women generally)
and their poverty rate is up to 49.3%. Yet even in the worst recession since
the Depression, more are employed and they are less poor than they were before
the 1996 law. In fact, researchers Bruce Meyer of the University of Chicago and
James Sullivan of Notre Dame have found that if all the work-based benefits
given to low-income workers were included — such benefits are mostly ignored by
the official poverty measure — the incomes of these mothers and children would
be even higher and their poverty rate even lower.
Nadya Labi, The Atlantic: Misfortune Teller. A statistics professor says
he can predict crime before it occurs. Drawing from criminal
databases dating to the 1960s, Berk initially modeled the Philadelphia
algorithm on more than 100,000 old cases, relying on three dozen predictors,
including the perpetrator’s age, gender, neighborhood, and number of prior
crimes. To develop an algorithm that forecasts a particular outcome—someone
committing murder, for example—Berk applied a subset of the data to “train” the
computer on which qualities are associated with that outcome. Philadelphia’s
parole officers were surprised to learn, for example, that the crime for which
an offender was sentenced—whether it was murder or simple drug possession—does
not predict whether he or she will commit a violent crime in the future. Far
more predictive is the age at which he (yes, gender matters) committed his
first crime, and the amount of time between other offenses and the latest
one—the earlier the first crime and the more recent the last, the greater the
chance for another offense. Berk’s expertise is being sought at nearly every
stage of the criminal-justice process. Maryland is running an algorithm like
Philadelphia’s that predicts who under supervision will kill—or be killed.
Mark Thoma, Economist view Blog: Whorfian Economics: The Interaction of
Language and Economic Decisions. Does the way in
which the language we speak describes the future have an impact our intertemporal
choices? I find a strong correlation between how a language treats future-time
reference (FTR), and the choices that speakers of those languages make when
thinking about the future. Specifically, in large data sets that survey
families across hundreds of countries, I find a strong and robust negative
correlation between the obligatory marking of FTR in the language a family
speaks, and a whole host of forward-looking behaviors, like saving, exercising,
and refraining from smoking.
Raúl López-Pérez,
Eli Spiegelman, IDEAS: Do Economists Lie More? Recent experimental
evidence suggests that some people dislike telling lies, and tell the truth
even at a cost. We use experiments as well to study the socio-demographic
covariates of such lie aversion, and find gender and religiosity to be without
predictive value. However, subjects’ major is predictive: Business and
Economics (B&E) subjects lie significantly more frequently than other majors.
This is true even after controlling for subjects’ beliefs about the overall
rate of deception, which predict behavior very well: Although B&E subjects
expect most others to lie in our decision problem, the effect of major remains.
An instrumental variables analysis suggests that the effect is not simply one
of selection: It seems that studying B&E has a causal impact on behavior.
AGING AND RETIREMENT
Emma L. Gorman, Grant M. Scobie, Andy Towers, NZ Treasury: Labour force
participation and retirement of older New Zealanders. The central question
which is addressed is the extent to which the labour force participation of
those aged 54 to 70 is influenced by their health status (both mental and
physical), in addition to a wide range of economic, social and demographic
variables. Discrete choice models are employed and particular attention is
given to the potential effects of unobserved heterogeneity. We find a range of
factors to be associated with the decision to retire, notably health status,
marital status and financial incentives. After accounting for the confounding
influence of unobservable factors which affect both health and propensity to
participate in the labour force, we find that physical health remains an
important determinant of labour force exit for older males. Finally, both the
marginal and aggregate effects of specific chronic illnesses on labour force
participation are estimated.
Alan Barrett, Irene Mosca, IZA: Announcing
an Increase in the State Pension Age and the Recession: Which Mattered More for
Expected Retirement Ages? In March of 2010, the
Irish government announced that the age at which the state pension is paid
would be raised to 66 in 2014, 67 in 2021 and 68 in 2028. Also during 2010, the
economic news became increasingly bad as the full scale of the fiscal and
banking crises in Ireland emerged. The question we address in this paper is
whether expected retirement ages of Irish individuals aged 50 to 64 changed as
a result of the policy announcement and/or the bad economic news. The data we
use are from the Irish Longitudinal Study on Ageing (TILDA). Between late 2009
and early 2011, over 8,500 people aged 50 and over in Ireland were interviewed
about a wide range of issues including standard socio-economic items such as
labour force status, earnings and education. Respondents were also asked at
what age they expected to retire. Our findings show that there was no
noticeable break in expected retirement ages before and after 3 March 2010 (the
day on which the policy announcement was made). However, there was a clear
shift of people into the categories "don't plan to retire" and
"do not know" before and after September 30 2010. This was the day
that the full scale of the banking crisis emerged (named by the media as
"Black Thursday") and was followed by the set of events which led to
the bailout of November 2010. Similarly, there was a shift away from modal
expected retirement ages after that date.
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