NOVEMBER 20 2015

Olivier Blanchard, Eugenio Cerutti, Lawrence Summers NBER: Inflation and Activity – Two Explorations And Their Monetary Policy Implications. We explore two issues triggered by the crisis. First, in most advanced countries, output remains far below the pre-recession trend, suggesting hysteresis. Second, while inflation has decreased, it has decreased less than anticipated, suggesting a breakdown of the relation between inflation and activity. To examine the first, we look at 122 recessions over the past 50 years in 23 countries. We find that a high proportion of them have been followed by lower output or even lower growth. To examine the second, we estimate a Phillips curve relation over the past 50 years for 20 countries. We find that the effect of unemployment on inflation, for given expected inflation, decreased until the early 1990s, but has remained roughly stable since then. We draw implications of our findings for monetary policy.

Sascha O. Becker, Marc-Andreas Muendler, U Warwick and CEPR: Trade and Tasks: An Exploration over Three Decades in Germany. This paper combines representative worker-level data that cover time-varying job-level task characteristics of an economy over several decades with sector-level bilateral trade data for merchandise and services. We carefully create longitudinally consistent workplace characteristics from the German Qualification and Career Survey 1979-2006 and prepare trade flow statistics from varying sources. Four main facts emerge: (i) intermediate inputs constitute a major share of imports and dominate German imports since at least the 1970s; (ii) the German workforce increasingly specializes in workplace activities and job requirements that are typically considered non-offshorable, mainly within and not between sectors and occupations; (iii) the imputed activity and job requirement content of German imports grows relatively more intensive in work characteristics typically considered offshorable; and (iv) labour-market institutions at German trade partners are largely unrelated to the changing task content of German imports but German sector-level outcomes exhibit some covariation consistent with faster task offshoring in sectors exposed to lower labour-market tightness.

David J. Deming, NBER: The Growing Importance of Social Skills in the Labor Market. The slow growth of high-paying jobs in the U.S. since 2000 and rapid advances in computer technology have sparked fears that human labor will eventually be rendered obsolete. Yet while computers perform cognitive tasks of rapidly increasing complexity, simple human interaction has proven difficult to automate. In this paper, I show that the labor market increasingly rewards social skills. Since 1980, jobs with high social skill requirements have experienced greater relative growth throughout the wage distribution. Moreover, employment and wage growth has been strongest in jobs that require high levels of both cognitive skill and social skill. To understand these patterns, I develop a model of team production where workers “trade tasks” to exploit their comparative advantage. In the model, social skills reduce coordination costs, allowing workers to specialize and trade more efficiently. The model generates predictions about sorting and the relative returns to skill across occupations, which I test and confirm using data from the NLSY79. The female advantage in social skills may have played some role in the narrowing of gender gaps in labor market outcomes since 1980.

John Gibson et al, IZA: The Long-Term Impacts of International Migration: Evidence from a Lottery. We examine the long-term impacts of international migration by comparing immigrants who had successful ballot entries in a migration lottery program, and first moved almost a decade ago, with people who had unsuccessful entries into those same ballots. The long-term gain in income is found to be similar in magnitude to the gain in the first year, despite migrants upgrading their education and changing their locations and occupations. This results in large sustained benefits to their immediate family, who have substantially higher consumption, durable asset ownership, savings, and dietary diversity. In contrast we find no measureable impact on extended family.

Giacomo De Giorgi, Maxim Pinkovskiy, NY FED: Health Inequality. The income gradient of health is increasing over the time period considered: in 1989, a 10 percent increase in personal income (at the county level) would be associated with an increase in life expectancy of about 0.29 years; the same association increases to 0.57 years in 2007.  From this result, we conclude that raising life expectancy out of the lower tail would be a much more welfare-improving intervention than fully equalizing consumption. (We get analogous results if we ask by how much the decision maker would need to have all consumption levels raised in order to be indifferent between the current consumption and life expectancy distribution and the proposed intervention).

Carol Graham, Julia Ruiz Pozuelo, Brookings: Is happiness just a matter of waiting for the right age? Happiness declines with age for about two decades from early adulthood up until roughly the middle-age years, and then turns upward and increases with age. Although the exact shape differs across countries, the bottom of the curve (or, the nadir of happiness) ranges from 40 to 60 plus years old. We explored how this relationship varies across countries throughout the world, based on nationally representative household surveys, again from Gallup data (2005-2014), with observations per country pooled over the years, with an average of 6,400 observations per country. We find that curves turn earlier in happier places. This means that in those places, people have more happy life years on average. Examples of this are Australia, the United Kingdom, or Denmark, where turning points are around 44 years old.  By contrast, countries that rank among the lowest in happiness, such as Russia, Poland, and Kosovo, have curves with higher turning points—from 61 to as high as 75 years in Russia! Even more worrisome is the fact that these countries also exhibit lower life expectancy (from 71 years in Russia and Kosovo to 77 in Poland), which means that there is just less happy life overall.