MARCH 11 2016

Ian Talley, WSJ:  The IMF Is Sounding the Alarm. Is Anyone Listening? The International Monetary Fund is sounding louder and louder alarms about the state of the global economy. The problem is, few major economies seem to be hearing them. “The IMF’s latest reading of the global economy shows once again a weakening baseline,” the fund’s No. 2 official, David Lipton, warned Tuesday in a speech to the National Association for Business Economics.

Kenneth Rogoff, Project Syndicate: The Fear Factor in Global Markets. The idea is that investors become so worried about a recession, and that stocks drop so far, that bearish sentiment feeds back into the real economy through much lower spending, bringing on the feared downturn. They might be right, even if the markets overrate their own influence on the real economy. On the other hand, the fact that the US has managed to move forward despite global headwinds suggests that domestic demand is robust. But this doesn’t seem to impress markets. Even those investors who remain cautiously optimistic about the US economy worry that the US Federal Reserve will view growth as a reason to continue raising interest rates, creating huge problems for emerging economies.

Dani Rodrik, Project Syndicate: The Politics of Anger. The appeal of populists is that they give voice to the anger of the excluded. They offer a grand narrative as well as concrete, if misleading and often dangerous, solutions. Mainstream politicians will not regain lost ground until they, too, offer serious solutions that provide room for hope. They should no longer hide behind technology or unstoppable globalization, and they must be willing to be bold and entertain large-scale reforms in the way the domestic and global economy are run.

Courtney Coile, Phillip B. Levine, NBER: Recessions and Retirement: How Stock Market and Labor Market Fluctuations Affect Older Workers. Market fluctuations affect retirement, but the story is nuanced — weaker long-term stock returns lead more-skilled workers to delay retirement, while higher unemployment rates lead less-skilled workers to retire earlier. In one study, we estimated that if the unusual stock and labor market conditions experienced during the most recent downturn were to gradually return to normal over a five-year period, there would be a net increase in retirements of about 120,000, or 1.2 percent relative to the estimated 10 million workers retiring during this period.12 In fact, the stock market has rebounded more quickly and the labor market more slowly, so the actual net increase in retirements is likely larger.

Melissa Kearney, Phillip Levine, Brookings: Income Inequality, Social Mobility, and the Decision to Drop Out Of High School. We propose that one channel by which higher rates of income inequality might lead to lower rates of upward mobility is through lower rates of human capital investment among low-income individuals. Specifically, we posit that greater levels of income inequality could lead low-income youth to perceive a lower return to investment in their own human capital. Such an effect would offset any potential “aspirational” effect coming from higher educational wage premiums. The data are consistent with this prediction: low-income youth are more likely to drop out of school if they live in a place with a greater gap between the bottom and middle of the income distribution. This finding is robust to a number of specification checks and tests for confounding factors. This analysis offers an explanation for how income inequality might lead to a perpetuation of economic disadvantage and has implications for the types of interventions and programs that would effectively promote upward mobility among low-SES youth.

Simon H. Boserup, Wojciech Kopczuk, Claus T. Kreiner, VOX: Bequests and wealth inequality: Evidence from Denmark. It is often suggested that intergenerational bequests such as inheritances create and perpetuate wealth inequality. This column uses Danish data to explore the effects of bequests on the wealth distribution. While bequests are found to increase the dispersion of absolute wealth inequality, relative inequality declines. These findings suggest that inheritance alone need not increase wealth inequality.

Paul Raeburn, Kevin Zollman, Scientific American: Game Theory for Parents. Mathematically tested measures to make your kids cooperate—all on their own. Even kindergartners have a sense of fair play and will share more with specific groups—family, friends and people who have been generous with them. Parents can tap this notion of fairness to encourage children to cooperate with one another and avoid spiteful behavior. Using classic strategies from game theory, kids can learn to establish fair agreements on their own, without any intervention from a parent or other authority figure.