Marco
Del Negro et al, Liberty Street Economics, Why Are Interest Rates So Low?: The low level of interest rates experienced since
2008 is largely attributable to a reduction in the natural rate of interest,
which reflects cautious behavior on the part of households and firms. Monetary
policy has largely accommodated the decline in the natural rate of interest, in
order to mitigate the adverse effects of the crisis, but the zero lower bound
on interest rates has imposed a constraint on the ability of interest rate
policy to stabilize the economy. Looking ahead, we expect these headwinds to
continue to abate, and the natural rate of interest to return closer to
historical levels.
Arash Nekoei, Andrea Weber,
IZA: Does Extending Unemployment Benefits Improve Job Quality? Contrary to standard search model predictions, prior
studies failed to estimate a positive effect of unemployment insurance (UI) on
reemployment wages. This paper estimates a positive UI wage effect exploiting
an age-based regression discontinuity in Austrian administrative data. A search
model incorporating duration dependence determines the UI wage effect as the
balance between two offsetting forces: UI causes agents to seek higher-wage
jobs, but also reduces wages by lengthening unemployment. This implies a
negative relationship between the UI unemployment duration and wage effects,
which holds empirically both in our sample and across studies, reconciling
disparate wage-effect estimates. Empirically, UI raises wages by improving
reemployment firms' quality and attenuating wage drops.
OECD:
In It Together: Why Less Inequality Benefits
All. The gap between
rich and poor keeps widening. Growth, if any, has disproportionally benefited
higher income groups while lower income households have been left behind. This
long-run increase in income inequality not only raises social and political
concerns, but also economic ones. It tends to drag down GDP growth, due to the
rising distance of the lower 40% from the rest of society. Lower income people
have been prevented from realising their human capital potential, which is bad
for the economy as a whole. Angel Gurría:
We have reached a tipping point. Inequality in OECD countries is at its highest
since records began. The evidence shows that high inequality is bad for growth.
The case for policy action is as much economic as social. By not addressing
inequality, governments are cutting into the social fabric of their countries
and hurting their long-term economic growth.
Jae
Song et al, NBER: Firming Up Inequality. Covering all U.S. firms between 1978 to 2012, we show
that virtually all of the rise in earnings dispersion between workers is
accounted for by increasing dispersion in average wages paid by the employers
of these individuals. In contrast, pay differences within employers have
remained virtually unchanged, a finding that is robust across industries,
geographical regions, and firm size groups. Furthermore, the wage gap between
the most highly paid employees within these firms (CEOs and high level
executives) and the average employee has increased only by a small amount,
refuting oft-made claims that such widening gaps account for a large fraction
of rising inequality in the population.
Paolo Crosetto, Antonio
Filippin, IZA: The Sound of Others: Surprising Evidence of Conformist Behavior .
It has been shown that subjects tend to follow others' behavior even when the
external signals are uninformative. In this paper we go one step further,
showing that conformism occurs even when the choices of others are not even
presented to the subjects, but just indirectly perceived. We use the
"Click" version of the Bomb Risk Elicitation Task, in which subjects
can infer the behavior of others only from the mass of clicks heard. This
signal is payoff-irrelevant and largely uninformative about the actual choices
of the other participants. Moreover, it is never mentioned in the instructions
and therefore it must be spontaneously (and possibly unconsciously) perceived
in order to be used. We control the exposure of subjects to clicks by
implementing treatments with and without earmuffs. Moreover, we test whether
the introduction of a minimal form of commonality, i.e., facing a common rather
than individual resolution of uncertainty, makes conformism more likely to
emerge. We find strong evidence of conformist behavior even in such an adverse
environment. Simply hearing the others clicking affects subjects' behavior.
Introducing a common random draw results in a further dramatic shift of the
average choices, in particular by women.
Vera
te Velde, Veracities : Awesome broken windows theory tests: This theory hypothesizes that if there is evidence of
some law/norm breaking behavior, that will cause people to break other
laws/norms at a higher rate.This is not due to inferences about levels of
enforcement, because the findings are just as strong in purely normative
(prescriptive, in addition to proscriptive) settings. In a world of marginally
statistically significant results, it's a thrill to see such a long list of
replications with huge and extremely statistically significant findings. Bikes
are parked in a row next to a fence with a conspicuous "no graffiti"
sign, and flyers are attached to each bicycle such that they must be removed to
use the bike. If no graffiti is on the fence, 33% of subjects will litter their
flyers. If graffiti is on the fence, 69% will. A temporary fence is set up
around a parking lot. Two police ordinance signs on the gate state "no
trespassing" and "no locking bikes to fence". People were
directed 200 meters around to an alternative entrance, but the gate was left
about 50cm ajar. If four bikes nearby were not locked to the fence, 27% of
people squeezed through the gap in the main gate. If the four bikes were locked
to the fence, 82% did. An envelope is left partially hanging out of a mailbox
and visibly has a 5 Euro note inside, showing through a window in the envelope.
In the control condition, 13% of people who passed the mailbox on foot stole
the envelope. If the mailbox was covered with graffiti, 27% stole the envelope.
If the mailbox was not covered in graffiti but litter was on the ground next to
the mailbox, 25% stole the envelope. Etc.
BONUS
Resolution
Foundation: An Ocean Apart. There was a time when some looked to the US model – in
which out-of-work benefits are less readily available, time-limited and
significantly less generous – for answers to the problem of extensive European
levels of worklessness. This was particularly the case during the so-called
‘tough love’ era of the 1990s. The reforms of this period resulted in sharp
falls in welfare reliance in the US and coincided with high employment among
even marginal groups such as single parents. The central argument was that US
institutions, including the welfare system, supported high employment and low
welfare reliance, but at a cost of higher earnings inequality. This received
wisdom held in the UK as much as anywhere else. Since the mid-1990s however,
the lead that the US used to hold over the UK in terms of employment has been
more than reversed. Out-of-work welfare reliance appears to have been on an
upward trend in the US since the turn of the millennium, in direct contrast to
the steady reduction recorded in the UK. (read page 22-23 about caseload in Sweden compared to other countries).
