SEPTEMBER 11 2015

Carmen Reinhart, Project Syndicate: Inflation, the Fed, and the Big Picture. The share of countries recording outright deflation in consumer prices (the green line) is higher in 2015 than that of countries experiencing double-digit inflation (7% of the total). Whatever nasty surprises may lurk in the future, the global inflation environment is the tamest since the early 1960s. Indeed, the risk for the world economy is actually tilted toward deflation for the 23 advanced economies in the sample, even eight years after the onset of the global financial crisis. For this group, the median inflation rate is 0.2% – the lowest since 1933. The only advanced economy with an inflation rate above 2% is Iceland (where the latest 12-month reading is 2.2%).

Justin Fox, Bloomberg: Maybe This Global Slowdown Is Different. Finally, consider the things that people do want to spend their money on. The defining consumer product of our age is the smartphone. A smartphone is a good, and it takes resources to make and transport it. Still, it takes a lot less resources than, say, a car. Most of its value is in the software that is loaded onto it and the people, information and entertainment you can connect to with it. That's a different sort of value creation than 20th-century resource-based value creation. If that's the direction the global economy is headed in, the connections between growth, trade and resource consumption aren't going to be the same as they have been. That is probably a good thing.

Agneta Berge, Fokus: Dags att lämna valvet! Bland dem finns Narayana Kocherlakota, som är ordförande för Federal Reserve Bank of Minneapolis. För USA:s del har den neutrala räntan sjunkit, menar han. Riksbankens ekonomer bedömer att detsamma har hänt i Sverige – och att det dröjer innan den når normala nivåer igen. Det betyder att räntevapnet är svagt, kanske obrukbart. Inte heller så kallade kvantitativa lättnader verkar ge önskad effekt. Finns det då kvar något i Riksbankens arsenal som kan få fart på priserna? Eller står vi, som Kocherlakota kallar det, vid penningpolitikens bortre gräns? Det skulle enligt honom kräva en ny ekonomisk-politisk doktrin, snarare än extremare åtgärder inom den befintliga.

Òscar Jordà, Moritz Schularick, Alan Taylor, VOX: Leveraged bubbles. The risk that asset price bubbles pose for financial stability is still not clear. Drawing on 140 years of data, this column argues that leverage is the critical determinant of crisis damage. When fuelled by credit booms, asset price bubbles are associated with high financial crisis risk; upon collapse, they coincide with weaker growth and slower recoveries. Highly leveraged housing bubbles are the worst case of all.

Jörgen Hansen, Damba Lkhagvasuren, IZA: New Evidence on Mobility and Wages of the Young and the Old. We present new evidence on the wage and mobility of young and old workers, which is difficult to explain using standard human capital theory. Instead, we propose a simple dynamic extension of the Roy model, where worker migration and wages are jointly determined at the individual level. According to this model, a higher moving cost among older workers is the main factor driving the lower mobility among this group. Because of the higher moving costs, older workers require a higher wage increase to move across regions than younger workers, a pattern that is consistent with individual-level U.S. data. We also find an interesting dynamic effect suggesting that, given a persistent labor income shock, a higher future moving cost makes workers more mobile today.

Ann-Sofie Kolm, Mirco Tonin, SU: Benefits conditional on work and the Nordic model. Welfare benefits in the Nordic countries are often tied to employment. We argue that this is one of the factors behind the success of the Nordic model, where a comprehensive welfare state is associated with high employment. In a general equilibrium setting, the underlining mechanism works through wage moderation and job creation. The benefits make it more important to hold a job, thus lower wages will be accepted, and more jobs created. Moreover, we show that the incentive to acquire higher education improves, further boosting employment in the long run. These positive effects help in counteracting the negative impact of taxation. Through numerical simulations, we show how this mechanism can contribute to explain the better labor market performance and more equitable income distribution of Nordic countries compared to Continental European ones.

Erez Yoeli, David Rand, NYT: The Trick to Acting Heroically. Much has been made of the military training of two of the Americans on the French train, and the envelope game helps to explain why. While many heroes have no military or other formal training, a sizable proportion do. The military hones soldiers’ cooperative instincts in an environment that has all of the required characteristics: Soldiers occasionally find themselves helping others at enormous personal risk; and they live, train and work together for relatively long periods, during which they have plenty of opportunities to observe whether a peer helps others without thinking. Every day, decent folk do good. But as the recent heroics in France remind us, heroes don’t just do good — they do good instinctively.

Mårten Palme, Emilia Simeonova, SU: Does women's education affect breast cancer risk and survival? Evidence from a population based social experiment in education. Breast cancer is a notable exception to the well documented positive education gradient in health. A number of studies have found that highly educated women are more likely to be diagnosed with the disease. Breast cancer is therefore often labeled as a “welfare disease”. However, it has not been established whether the strong positive correlation holds up when education is exogenously determined. We estimate the causal effect of education on the probability of being diagnosed with breast cancer by exploiting an education reform that extended compulsory schooling and was implemented as a social experiment. We find that the incidence of breast cancer increased for those exposed to the reform.

Borko Handjiski, Brookings: Mobile connectivity in Africa has already arrived. Lack of resources, be it electricity, roads, or doctors, makes it difficult for developing countries to produce goods and services that are energy intensive, need efficient land transport, or a healthy workforce. However, in today’s modern economy we are witnessing a rapidly expanding array of services with mobile technologies as their backbone. High mobile penetration gives developing economies the capacity to produce and consume these services. In 2014, mobile technologies were responsible for an estimated 3.8 percent of global GDP, of which 2 percentage points came from the associated productivity increases (just think of your drop in productivity when your cell phone battery dies). In SSA, the contribution of mobile technologies to GDP was even higher—5.4 percent. McKinsey estimates that (mobile) internet could make up 10 percent of Africa’s economy by 2025.